One Consideration Before Buying Into a Mutual Fundby SEC
Before investing in a mutual fund, know how it will impact your tax bill. The law generally requires a fund to make a capital gains distribution to shareholders if it sells a security for a profit that can't be offset by a loss. If you receive a capital gains distribution from a fund, you will likely owe taxes on it -- even if the fund has had a negative return since you invested in it. For this reason, you should call the fund to find out when it makes distributions so you can time your investment in the fund to avoid receiving a capital gains distribution immediately upon investing and paying more than your fair share of taxes. Some funds post that information on their websites.