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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 76.07

-1.1%

3:59 PM EST

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To: rkral who wrote (60990)	8/9/2002 2:53:33 PM
From: RetiredNow	Read Replies (1) of 77400

You said it yourself. In your example, you get taxed 1) on the $20 distribution and 2) on the change in net asset value of $210. That's double taxation. To clarify, if I directly owned the same exact basket of stock that the mutual fund owned, the only taxes I'd pay would be on the sales of stock throughout the year. In other words, I'd only pay taxes on the same $20 as above...and that's it. Then of course, you pointed out the other problems with mutual funds like the fees and loads and the lack of proration of capital gains distribution over time, etc. So all in all, owning stocks directly is the best course of action, IF you have enough money to be well diversified. The typical financial planner will tell you $100K is the minimum. That means that the majority of Americans get screwed taxwise. Mutual funds do have their place though, namely, in 401Ks where tax consequences of churn is irrelevant.

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