CHERYL D. BROUSSARD, AUTHOR, FINANCIAL ADVISOR AND PRINCIPAL AT PALO ALTO, CALIFORNIA-BASED BROUSSARD & DOUGLAS (415-688-1188), says if you’re considering putting money into a mutual fund, do so as early as you can during the year. Broussard, who wrote The Black Woman’s Guide to Financial Independence and Sister CEO: The Black Woman’s Guide to Starting Your Own Business, says waiting until the latter part of the year can boost your tax bill without adding to your gains.
“While some mutual funds pay dividends and capital gains on a quarterly basis, many wait until the month of December,” she notes. That means the mutual fund passes the tax bite on any profit made selling stocks and bonds during the course of the year onto you the investor. “If you invest in a mutual fund on December 1, and the fund pays out capital gains on December 31, you’ll have to pay taxes on your investment.” So even though you invested late in the year and didn’t profit from the mutual fund’s capital gains, Broussard says, you’ll be strapped with additional taxes to pay.