Taxable Investment Account

Taxable Investment Account


Be Careful What You Put in Your Taxable Investment Account

By Kent Livingston

Mutual funds are a great option for anyone who wants to invest his or her money in the stock market but has limited time, money or knowledge. In short, mutual funds offer a simple way for just about anyone to play the market. Essentially, a mutual fund combines money from thousands of smaller investors into a large pool. The manager of that pool then buys stocks, bonds and/or other securities with that money. If you have contributed to the fund, then you get to claim a stake in all of that fund’s investments.

Choose Wisely

Mutual funds are a great way to be involved in the stock market without having to worry about tracking all of your individual holdings. However, as with any investment, you have to choose your mutual funds wisely. Even more importantly, you need to carefully choose in what kind of account you place them. If you put your mutual funds into the wrong kind of investment account, it could definitely come back to haunt you. So how do you know where to put them? Let’s take a look.

Retirement Account

Placing your mutual fund earnings in a tax-deferred retirement account is probably the best way to go. By having your funds in a 401K or IRA retirement plan you can avoid a potentially huge tax bill. However, if you have placed your mutual funds in some kind of taxable account then you could be feeling the pain come payout time.

Taxable Account

One type of investment account that is particularly bad for mutual funds is a has-been fund. This is a fund that used to have great returns but is now falling from grace. What happens is that investors begin to leave the fund, which means the fund needs new cash. That could mean that selling off old shares at rebated prices might be the only option. So what should you do to avoid this kind of scenario? Avoid buying any fund that includes a big number for “unrealized appreciation.”

Rules To Remember

There are some other important rules to remember for people who have mutual funds in taxable accounts. They are:

  • Avoid high-turnover funds – short-term capital gains are not good for taxable funds. Therefore, you want to avoid funds that have high turnover rates. Short-term gains can be converted into “ordinary income,” which can be costly to your account.
  • Selling might be the best option – sometimes the best option is to get out while you still can, instead of paying an even higher tax bill down the road.
  • Buy index ETFs – Index funds are a good choice because they don’t redeem with cash. Instead, they are redeemable with more stock.

Don’t Let The IRS Take it All

No matter what kind of mutual funs or other investments funds you have, you need to always be aware of the tax laws that apply. That is where GROGO can help. Tax planning is one or our specialties, including stock options planning. Don’t let the IRS take more of your money than they should. We can help you plan your taxes the right way for each of your investments. Just give us a call at 1-877-CPA-2006, or click here.


We hope you found this article about “Taxable Investment Account” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at  Unfortunately, we no longer give advice to other tax professionals gratis.

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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.


Alan L. Olsen, CPA, Wikipedia Bio is a proud sponsor of The American Dreams Show.



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