If you own a mutual fund as a regular savings account, you may be
subject to paying taxes on your mutual fund. If you had a substantial
income or capital gain distribution, you may have substantial taxes.

Mutual funds that buy and then sell securities at a profit are called
high turnover mutual funds. Their owners could be subject to taxes
yearly. Those who do not turnover or sell the securities in their mutual
fund have low turnover and their owners will not be subject to high
taxes.

Most mutual funds pay the capital gains and dividends once a year in
October or December, read your prospectus, because this could be different
for your mutual fund. There are a few that have quarterly payouts.

The turnover of a mutual fund is listed on most mutual fund reports so
you will know if you are getting a low turnover or high turnover mutual
fund. Read mutual fund reports before investing in a mutual fund so you
will have this information. An example of a low turnover mutual fund is
80%, an example of a high turnover mutual fund is 400%.

If you purchase a mutual fund right before the payout date and you placed a
lot of money in a high turnover mutual fund, you will still be responsible
for the taxes for that tax year. You must wait until after the dividend and
capital gain payout to avoid the taxes.

The tax consequences on your mutual fund profit can be significant if
1. You have a lot of money in one mutual fund, and 2. You have a mutual fund
manager who is engaged in high turnover of his securities. Get all of your
facts before you purchase a mutual fund, read online report about the mutual
fund you are interested in and then read the prospectus.

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