Many investors
are bombarded with the buzz-word “taxes” in relation
to investments. Some may even choose investments solely because
of reported tax savings. While saving money on taxes is a
serious consideration, an investment should not be selected
solely on the basis of tax savings. Tax efficiency is more
important, and especially for those in high tax brackets,
taxes can have a significant impact on your bottom line.
Some tax-efficient examples are:
- Tax-free money market accounts
- Tax-efficient mutual funds
*Stocks are tax efficient when you take into consideration
the fact that the taxes on stocks do not have to be paid
until they are sold and you take profits. At that time, you
must pay short-term capital gains tax, if you've held the
stock less than one year, or long-term capital gains tax,
if you've held the stock more than a year. The difference
is significant between short-term and long-term capital gains
tax.
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