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Mutual Funds

The Share Price Changes

Naturally, each investor wishes that the share price of the mutual fund will increase thereby increasing the income and value of the shares of the mutual fund to the investor. This is part of the rate of return that is calculated for the mutual fund. Much like with the individual shares of a company, if the price of a purchase of stock increases while the investor is holding the stock, there is no taxable event in most cases. In fact, there usually is no taxable event as to the shares of stock purchased, until the shares of stock are sold. Naturally, as with everything under the tax code, there are some exceptions to this general rule. These are not the subject of this discussion. Each of these three components of a mutual fund return has or may have a tax aspect or consequence to it and your tax advisor ought to be consulted with respect to each of these consequences. Even though you many not have received a check for income, in any of three categories, the fund may realize certain income, and as such you as a fund holder may still be considered to have received taxable income period.

Mutual funds are perhaps one of the most popular and best investment vehicles for the average investor, since the elimination of research is a necessary part of the investment vehicle. Other than researching the investment fund family or fund group, there is little decision-making on the part of the investor. Once the fund is decided upon, a professional money manager at the head of the fund makes all of the decisions based on all the research performed by the fund for the individual investors

Mutual Funds
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