No. of Recommendations: 3

Another element of index vs. managed fund. I know that the discussion so far is focused on funds held in a tax-deferred account. For those just starting their investment life, don't make the same mistake that I made.

When I was young and foolish, I relied on the Wise to help me make some investment decisions in a taxable account. I was steered to several managed funds, which I promptly invested in.

To my complete surprise and horror, at tax time I had an additional and significant tax burden with capital gains taxes owed for the churning of stock in the managed funds. Because we were in a high tax bracket it really hurt. I believe (it was some years ago) I paid far more in taxes than the fund's capital appreciation.

It was then that I adopted a Foolish philosophy and spent alot of time becoming wise. Got rid of the Wise, sold the mutual funds at a loss and switched to individual stocks in my taxable account. I only have index funds in my tax deferred account which is of equal value as my taxable account. I have acquired both QQQ and SPY for the taxable account in addition to the individual stock I hold in the account. Have kept the fees extremely low. NowInMaui
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