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Don’t Make Me Say I Told You So 129
comparing fund performance. Net return is the bottom line – it
is an investment’s true return after all costs are deducted.
Loss of Control Over Taxable Events
If any mutual fund or other diversified portfolio sells stocks
during the year, an investor may have to pay capital gains taxes
on stocks that have been sold. It’s possible to have losses in
your portfolio over the course of the year but end up paying
capital gains taxes anyway, if the fund is purchased in a taxable
account. Keep track of the cost basis of your initial purchase
and new shares that are acquired by reinvesting distributions.
Note: This loss of control over when capital gains taxes are
paid applies to non- qualified accounts. If your account is an
IRA, IRA Rollover, or any other qualified account, this is not an
issue.
Summary
► Mutual funds offer diversified, professionally-managed
stock portfolios for individual investors. Index fund and
exchange-traded funds are not actively managed.
Chapter 3: You Must Have Growth In Your Portfolio
