Check out some similar questions!

wordlover · Feb 3, 2008, 05:52 AM

I am retired and have IRA's which are good; however, I have funds in non-tax sheltered accounts invested in mutual funds that have just issued huge distributions (dividends, distributions, etc.). How can I invest these funds so that they will grow but at the same time avoid such huge tax consequences? Are there funds that do not have such end-of year distributions? I am 63.
Thanks!:)

ebaines · Feb 5, 2008, 07:22 AM

It's always a bit of a surprise when mutual funds do these distributions, typically in December, which can suddenly generate substantial tax burdens on the share holders. Couple of suggestions:

1. Look into tax-exempt bond funds - obviously they pay out tax-free dividends, and typically have relativelky small capital gain distributions.

2. In general index funds will have smaller capital gain distributions than actively managed funds.

3. Look into ETFs (exchange traded funds) - they also typically have relatively small cap gain distributions.

4. There are a lot of funds that are specifically marketed as "tax efficient." Do some research - check out the various web sites (Fidelity, Vanguard), also Forbes.