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The Basics |
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Taxable Events You May Not Be Able To Control
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Investing
in an mutual fund gives you plenty of
benefits — including professional
management, built-in diversification and
investment convenience — but you
can't control the taxable events that
are triggered by your fund's manager:
Taxable
income dividend distributions,
which are taxed at your ordinary income
tax rate;
Distributions treated as
capital gains, of which there are two types:
- Short-term capital gains.
If a manager takes a profit on a security that's been held in
a fund's portfolio for less than one year, short-term capital
gains earned by the fund are taxed at the shareholder's ordinary
income tax rate.
- Long-term
capital gains. If a manager takes
a profit on a security that's been held
in a fund's portfolio for more than
one year, the maximum tax rate applied
to the distribution is 15%.
Next:
What Taxes Apply To Fund Distributions?
This information is general in nature and is not intended to constitute tax advice. Always consult your tax advisor for more detailed information on tax issues and advice on your specific situation.
Investors should consider the investment objectives, risks, charges, and expenses of a fund carefully before investing. Download a prospectus that contains this and other information about a fund, and read it carefully before investing.
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