2007 Press Releases

FOLIOfn Helps Avoid Year-End Tax Bite of Mututal Funds: A Problem Investors May Not Be Aware Of


VIENNA, Virginia – People who want to reduce their tax bill next April should start taking steps now, before the end of the year—and that includes tallying up the gains and losses from their investments. Investors with mutual funds in their taxable portfolios may find themselves hit with an unexpected tax bite. Each year, mutual funds are required by Federal law to distribute at least 98% of realized capital gains, interest, and dividends received to all shareholders. Investors can be hit with a taxable gain on a mutual fund, even if they’ve only held the fund for a day, or if the fund has had a loss for the year. Mutual funds can cause tax problems because investors have no control over when and how much their funds realize in gains. This is a problem investors may not be aware of.

The tax bite can be enormous. As reported in Money magazine on April 18, 2007, shareholders in taxable mutual fund accounts got “slammed by Uncle Sam in 2006.” They paid at least $23.8 billion in taxes, according to Lipper, a fund research company, which tabulated this number in their report entitled “Taxes in the Mutual Fund Industry 2007: Assessing the Impact of Taxes on Shareholder Returns,” That figure includes the impact on investors who simply held their funds and reinvested their distributions. Over time, this can seriously erode investors’ returns. According to Lipper, during the past 20 years, the average investor in a taxable stock mutual fund gave up the equivalent of 17% to 44% of his returns to taxes.

About Folio Investing

Folio Investing, a division of FOLIOfn Investments, Inc., is an online brokerage that enables investors to manage stocks, ETFs, and mutual funds as integrated investment portfolios called “Folios” that deliver better control, greater transparency, and lower cost. Investors can create their own Folios, much like creating personalized ETFs or mutual funds, or invest in over 100 Ready-to-Go Folios representing market indices, sectors, geographical regions, target dates, and more. The Folio Unlimited Plan features unlimited commission-free trading in twice-daily windows for only $29 a month or $290 a year. Ready-to-Go Folios can be managed or unmanaged, are not registered investment companies, and are offered by FOLIOfn Investments, Inc., a registered broker-dealer. FOLIOfn Investments, Inc. does not provide investment, tax, or legal advice. FOLIOfn Investments, Inc., is a member of FINRA/SIPC.