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Subject:  Re: tax deferred variable annuity Date:  12/10/1998  5:05 PM
Author:  ataloss Number:  7170 of 88786


I have recently talked myself into selling a fund I had held for 10 years. It had lagged the s&P 500 by a couple of percent per year. It took me a long time to decide to do this.

I did make a mistake in my previous calculation. I assumed that you lost 20% of the value of your funds immediately to capital gains taxes. This 20% loss, of course, only applies to the gains. If, say, half of your account value (x) is due to capital gains and half is due to contributions, after applying the capital gains tax, you will be starting your new index fund with 90% of x. You will "catch up" more quickly than I had suggested. Of course, life isn't that simple and funds don't have constant annual returns or lag by constant percentages.

If you want to become annoyed at your funds, multiply the annual expense ratio by the number of dollars under management. I did this with my 1996 annual reports.

I have some money invested in Vanguard's Capital Appreciation Portfolio. It hass an expense ratio of .17% (which is less than the index 500) and it strives to minimize capital gains and income distributions. I don't know if it will be better than an index 500 fund but it sure beats annuities for deferral of gains.

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