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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: rkral who wrote (60990)	8/9/2002 2:53:33 PM
From: RetiredNow	Read Replies (1) \| Respond to 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.

To: rkral who wrote (60990)	8/10/2002 12:48:09 AM
From: ehasfjord	Read Replies (1) \| Respond to of 77400

You forget that you have already paid taxes on the funds that you invested. Now, you are also paying taxes on the distributions that that fund must make. Even though the funds value may go down it doesn't make a difference if the fund sold "stuff" that had gone up in value. Therein lies the double taxation. What most mutual funds do in a bear market: 1. People start redeeming (cashing out) their $'s. 2. If the fund needs to raise cash for these redemptions, the fund will sell stocks that are highly traded, and may easily be purchased back at a lower price. Examples of these stocks are CSCO, ORCL, HD, IBM, etc... 3. You will pay the price re: gain that the fund had between the original purchase price (prior to the sale) and the sale price. This shows up as a "dividend". 4. This type of crap goes on until there are no more redemptions. This is known in the trade as capitulation! 5. At this period in time, the market starts going up since the funds start buying back the "easy traded" stocks that they had sold, at the (normally) much lower price. 6. John Public see's this happening, says gee, I ought to get back in the market, and WHAM you get a 300 point swing. Take Care!