This is perhaps the most important step to take as the new-year kicks off--especially if you're concerned about the long-term performance of your mutual funds.
Mutual funds aren't static investments. Strategies and asset allocations change; managers come and go; fees creep up--and, suddenly, your perfectly positioned portfolio is out of whack.
Step Two: Mind the Dividend.
When you rebalance your portfolio and decide to sell a fund, then sell before the dividend. You'll pay a lower tax on your entire gain. Sell after the dividend, and a portion of your gain will be taxed as ordinary income, not capital gains. In other words, you'll pay more.
Buying a fund that did well? Wait until after the dividend. Otherwise, you'll get a check back for part of your purchase price--and be taxed on the proceeds.
Step Three: Sell and Save.
The market definitely has its ups and downs over the course of a year. This is not necessarily a bad thing--if you take advantage of it.
If you suffer losses at year's end in any mutual funds--funds you don't necessarily want to keep for the long term--then use your losses to offset capital gains (and the accompanying taxes) in your other, more profitable investments.
Do you want more research, analysis, and tips? Turn to the gold standard in mutual fund analysis.
For more than 25 years, Morningstar analysts have been delivering the goods on mutual funds, scrutinizing everything from strategies and management to stewardship, trading costs, and long-term performance. Our 100-person-strong global fund analyst team conducts thousands of manager interviews and hundreds of on-site visits each year.
Morningstar doesn't just lead the field in mutual fund analysis. We invented it. So, if you're serious about mutual fund investing, you should be serious about Morningstar FundInvestor. Our depth, experience, and independent recommendations pave the way to your financial success. We find the funds that stay competitive--and that offer you competitive advantages.
With Morningstar FundInvestor, you get quantitative research that taps the world's most comprehensive fund database to determine the best strategies for long-term investing success. You get extensive qualitative research of portfolio managers, analysts, and traders from the industry's most-knowledgeable fund analysts. And in the end, you get a truly comprehensive view of how a fund invests, who manages it, and what it can do for you. This is exactly what you need to invest with confidence.
It's a Great Time to Invest.
Now is a perfect time for Step One: Rebalance Your Portfolio. We've got scores of fund recommendations for you so that you can clear out the deadwood and invest with the best in the business. We also run funds through a battery of tests and let you know about the best strategies for picking good funds. When we come up with cutting-edge research, you'll see it first.
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