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Tax Efficient Strategies for Mutual Funds

by Peter J. Creedon

By Zina Kumok

Unfortunately, CFP Peter J. Creedon and CEO of Crystal Brook Advisors says that if you’re looking to invest in an asset that will be easy to sell and not produce a potential tax headache, you’re barking up the wrong tree. Because of the inherent nature of mutual funds, they’re harder to dispose of efficiently than simpler assets.

“Mutual funds, generally are not tax efficient investment vehicles,” Creedon said. “Since the funds have a number of investments that are traded, exchanged or pay dividends, interest or other income, they can generate ordinary income, dividends (both qualified and non-qualified), capital gains (short and long term) or trigger other internal taxable events. A good fund manager tries to offset as much of the taxes as possible and can use past losses to offset gains.”

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