She felt that she has been paying too much on taxes over the last few years and was asking me why. I know that when you sell shares of stocks, you will be taxed on the gains even if reinvest in other stocks. Is this the same for mutual funds? Her advisor moves her money around almost monthly, but always stays in the same fund family (I don't agree with his choices, but that's another story). Will she be taxed on gains from each time shares are sold to buy shares in another fund?The short answer is yes. Your grandmother is probably paying way too much on taxes. Medium length answer is that when you sell a stock which has risen in value, you generally pay capital gains on it (unless it's in an IRA or something like that). Since mutual funds are made up of many different stocks, selling a mutual fund at a profit will incur capital gains taxes. But taxes are not the only issue when dealing with advisors and mutual funds.For a nice, more detailed answer and a good overview of mutual funds and why you shouldn't own one, go here:http://www.fool.com/school/mutualfunds/mutualfunds.htmPay particular attention to the sections about "Costs" and "Index Funds".In my personal opinion, it sounds like your grandmother's advisor is playing with her money. I mean, that's what he gets paid to do, right? If he just let it sit in one fund for many years and didn't actually DO anything, why would anybody pay for his services? Every time a stock or a mutual fund is traded, there are costs and commissions associated with the transaction. And your grandmother is the one paying for it.
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