May 06 2008
selling mutual funds tax
» Escrito en Cash Loan Business Tips por writer3 a las 13:58
selling mutual funds tax
Here are some simple ways to increase your investment returns without much work.
Switch to Index Funds - Studies show that 70% of actively managed funds fail to beat their benchmark over the long term. If you can’t beat ‘em, join ‘em.
Watch your expenses - Numerous Morningstar studies show mutual fund expense ratios are the single best predictor of future performance. All else being equal, a cheaper fund will tend to outperform a more expensive fund. A mutual fund charging 1.5% per year will have to outperform a rival charging 0.2% per year by 1.3% just to break even. That’s a big disadvantage.
Get the match - If your employer matches 50% of your contributions up to 6% of your salary, that’s an immediate 50% gain on your investment. Can you think of any other investment that offers a risk-free 50% gain?
Minimize your taxes - Put tax-inefficient funds such as bond funds, small-cap funds, and actively-managed funds in your tax-advantaged accounts so they can compound for you at a higher rate without the drag of taxes.
Diversify - Not putting all your eggs in one basket greatly reduces the chances of your portfolio suffering a catastrophic, irrecoverable loss, increasing your long-term returns.
Rebalance Regularly - Regularly rebalancing your portfolio forces you to buy low and sell high as you trim back your recent winners to buy more of your recent losers, which may be poised to out-perform.
Don’t cash out your 401k when you change jobs - Cashing out your 401k when you change jobs is financial suicide. Not only do you pay income taxes on the amount you cash out but also a 10% penalty, not counting local or state penalties. Even worse, you are borrowing from your future and will miss out on decades of compounding. The end result could be a deficit of hundreds of thousands of dollars. Roll over your 401k to an IRA instead.
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selling mutual funds tax
