Message Font: Serif | Sans-Serif
No. of Recommendations: 1
"As I understand it, the mutual funds always produce reportable income through the distribution of capital gains; growth stocks often don't."

I think you'll find if you look at tax-managed or low turnover growth funds, there is very little tax. Taxable distributions for these funds are usually less than 2% or even 1% annually of the fund's worth. Vanguard has a good recent discussion of tax efficient fund management.

If you buy non-dividend yielding stocks, you won't pay capital gains taxes until you sell, but you will pay when you sell. You have to weigh other factors in deciding between a fund and individual stocks, including risk, potential returns, and time you want to spend, but you will find little tax advantage, if any, with individual stocks compared to a low tax fund.
Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.