Exchange Traded Funds Investment U
Post on: 20 Май, 2015 No Comment
by Alexander Green. Chief Investment Strategist, The Oxford Club Monday, November 24, 2008 Wisdom of Wealth
Investment Director, The Oxford Club
Monday, November 24, 2008: Issue #891
With the stock market’s historic drop this year, some investors have fled to cash. Others are cautiously buying. Most, however, are sitting on their hands.
They shouldn’t be.
Even if you lack the cash — or the willpower — to buy into this market, there is still a very smart move you can make: switch.
Switch from your poor-performing, high-cost, tax-inefficient stock and bond mutual funds to index funds or exchange-traded funds (ETFs).
It’s a very smart move. Here’s why.
Why Choose Exchange Traded Funds Over Mutual Funds?
Compared to exchange traded funds. most mutual funds are a lousy deal, here’s why:
Don’t stand for it. Now is your chance to fight back.
Switching to Exchange Traded Funds Will Save On Taxes
Switch from your underperforming mutual funds to index funds and exchange-traded funds — and save yourself thousands of dollars in taxes in the process.
The IRS allows you to take losses each year to fully offset any realized capital gains. And also allows you to take capital losses to offset up to $3,000 in earned income.
In a year as nasty as this one, of course, you probably don’t have too many realized capital gains to worry about.
You should make this switch anyway. The IRS allows you to carry forward your losses indefinitely to offset future capital gains.
As bleak as the outlook is today, there will be capital gains in your future and, eventually, the tax on them is going to be higher than it is now.
Aside from the thousands you’ll save in taxes (and expenses) in the years ahead by making this switch to exchange traded funds. there is an important psychological reason to do it.
When you get your statements in 2009 and beyond, instead of looking at a smorgasbord of losing positions you’ll be looking at winners. You may not end up buying at the very bottom — few do — but you will have bought a whole lot closer to it than you did originally.
Exchange Traded Funds — Turning Market Lemons Into Lemonade
So take the lemons the market has handed out so abundantly this year and turn them into lemonade with exchange traded funds. Here’s how:
