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From Retirement & Financial Planning Free Report Issue: Thurs, May 4, 2006
Stock funds often advertise their past performance. However, the
results that are reported aren't necessarily the same as the
dollars that wind up in investors' pockets. Those performance
numbers generally are pre-tax numbers but the after-tax results
can be much different.
Stock funds typically trade their portfolios, to a greater or lesser
degree. Each year, the law requires a mutual fund to distribute any
net capital gains to shareholders. Tax will be owed on those gains,
even if the distribution is reinvested in the same fund or in another
security. Thus, investors may have to pay tax on distributions
they've never put in their pocket.
To avoid losing returns to taxes, check out a fund's past performance.
A fund that has regularly distributed substantial capital gains to
shareholders, year after year, may practice heavy trading and may
continue to deliver taxable gains. Before you invest, ask your broker
or a fund sales representative about its distribution record.
swsop
Stock funds often advertise their past performance. However, the
results that are reported aren't necessarily the same as the
dollars that wind up in investors' pockets. Those performance
numbers generally are pre-tax numbers but the after-tax results
can be much different.
Stock funds typically trade their portfolios, to a greater or lesser
degree. Each year, the law requires a mutual fund to distribute any
net capital gains to shareholders. Tax will be owed on those gains,
even if the distribution is reinvested in the same fund or in another
security. Thus, investors may have to pay tax on distributions
they've never put in their pocket.
To avoid losing returns to taxes, check out a fund's past performance.
A fund that has regularly distributed substantial capital gains to
shareholders, year after year, may practice heavy trading and may
continue to deliver taxable gains. Before you invest, ask your broker
or a fund sales representative about its distribution record.
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