Tax-Smart Investors Avoid Mutual Funds


With tax time approaching it may be worth re-evaluating the way you invest.

Investors should avoid mutual funds, especially, for taxable portfolios.

Mutual funds are expensive… In an investment world that is increasingly driven by indices expense is one of only a few areas investors should try to control.

Mutual funds pool assets, expenses and tax liabilities across all shareholders. This creates the potential for unintended tax outcomes. Investors that own their underlying investments directly not only avoid the tax randomness that can be found in mutual funds but may also harvest capital losses intentionally.

Technology has largely wiped out the advantages historically provided by mutual funds. Investing directly in individual securities eliminates the potential for another investor to impact your taxes.

For these reasons, if you own mutual funds you may want to evaluate other options.

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