Funds usually employ a staff of analysts and researchers who sift through stocks looking for the best investments, and they charge an array of fees for providing this service. Fund managers trade stocks on behalf of their funds' investors. Folios, on the other hand, are managed by individual investors themselves, who have complete control over which stocks to include in their Folios. They can buy and sell stocks whenever they choose to do so. Taxable distributions vs. control .
Investors have little control over the taxes that stem from their mutual fund distributions.
They also decide whether to own stocks that pay dividends. If they do purchase dividend-paying stocks, they are required to distribute those dividends to the fund shareholders. The tax burden from capital gains and dividends are passed on to fund investors in the form of a taxable distribution. Because fund managers do all the trading, fund investors have no way to control this tax burden. For example, it lets investors minimize or maximize their capital gains when they sell stocks by using tax lots.