Mutual Fund Investments

Investing in mutual funds is a smart way to generate more income. However, it’s important to keep in mind that you are required to pay taxes on most mutual fund income. While, sometimes, these taxes aren’t that bad, there are certain cases in which the taxes can outweigh the overall benefit of the investment. To help you determine whether or not an investment is worth it, tax-wise, your best bet is to speak with an investment advisor. However, you can also make use of a few simple tips.  

Tip #1: Reduce Turnover Ratio

A mutual fund will automatically become more tax efficient if its turnover ratio is reduced. What that means, in simple terms, is that when a mutual fund executes a lot of trades, it will have high turnover, thus causing you to have to pay regular, full-price tax rates on the fund’s gains. By buying and selling fewer securities throughout the tax year- you should buy and sell only when it’s absolutely necessary and will ultimately be financially beneficial-you can thus reduce the amount and type of taxes you’ll have to pay.

Tip #2: Don’t Invest in (As Many) Dividend Paying Stocks and Bonds

Dividend-paying stocks and bonds are not always a bad thing. Indeed, they can be quite beneficial since you’ll enjoy regular interest payments. However, you do want to keep in mind that the more of these investments you have and thus the more funds you get from them, the higher your taxes are going to be, and this income is generally taxed at the regular rate.

Your best bet is to steer clear of dividend paying investments or to only choose those that are going to ultimately benefit you more than they’re going to hurt you. Again, an investment advisor can really come in handy for helping you to figure out whether a particular investment of this type is really going to be worth it.

Tip #3: Invest in Tax Free Funds

One final smart thing you can do is to choose to invest in tax free funds, such as government or municipal bonds. These investments will gain interest for you, and the good news is that the interested gained will not be taxed! You can go for a completely tax-free mutual fund or just include tax free funds in your mutual fund; either way, you’ll benefit by getting money you can enjoy without paying taxes.

For more tips and personalized, one-on-one advice, make sure you secure a skilled investment advisor to help you make all the right decisions and to put these tips into practice!

Retirement Savings Strategies

Everyone knows that it’s important to save money for retirement, but, unfortunately, most people find that saving is easier said than done. Obviously, the best way to save is to contribute as much as possible via your employer’s 401(k) plan or a personal IRA or brokerage account. However, getting the cash to do that can be difficult, but notice we said difficult, not impossible.

The trick is to assess where you’re overspending unnecessarily and to cut out (or at least down) that spending. If you can do that and engage in a few good investment strategies, you should find that saving for retirement isn’t quite as hard as you thought.

Strategy #1: Save on Appliances

As mentioned, one way to find cash to invest in retirement is to find ways to cut down on your expenses. And, one of the easiest ways to do that is to save on one of your biggest purchases- large appliances. The next time you’re in the market for a washing machine, dishwasher, or anything in between, find a good sale even if it means driving out of town, and look for rebates too. Try to choose an energy efficient model whenever possible to save money long-term. In fact, even if your appliances are currently in good shape, look into modern efficiency updates that can help you to save on operating costs. You can take the money you save all around and invest it in retirement funds!

Strategy #2: Try Traditional Mutual Fund Investing

A traditional mutual fund can be a wonderful and wonderfully simple way to invest once you have some money saved up. Once you have at least $2,500 ready to invest, shop around for a good online brokerage with affordable investment fees and invest away!

Strategy #3: Choose Insurance Plans Wisely

Finally, be aware that one of the things for which Americans overpay the most is insurance of all kinds. Be careful that you’re only signed up for the insurance that you truly need; you might want to find a financial advisor or someone trustworthy who knows insurance to help you decide what’s really necessary. Then, regularly shop around for the best rates and deals, which, by the way, change often. As long as you’re protected, it doesn’t really matter where that protection comes from, so going for the most affordable option is always wise.

As you can see, saving for retirement isn’t as hard as you might think. Try these strategies, and you should be working steadily toward your saving goals in no time.  #RetirementStrategies

Related articles

• Investing 101: A primer on mutual funds (getrichslowly.org)