I guess what I'm really looking for are tax-friendly funds. Unexpected tax hits are a bummer, and unfortunately, a lot of taxpayers faced the same problem because of 1999 mutual fund distributions. The good news is they're complaining about it, and the mutual fund industry is paying attention. However, it's a big issue when your account is taxed. Do this year after year and it can have a serious impact on your investment results.
Most funds only advertise their pre-tax returns.
Some index funds incorporate additional tax-efficiency strategies to limit taxable distributions to shareholders. Both have expense ratios under 0.2 percent. To discourage active traders from messing up the low-fee concept, index funds sometimes charge a redemption fee. You can expect redemption fees to range from 0.5 percent to 2 percent. As investors get more and more fed up with income and capital gains distributions, more and more tax-efficient funds are popping up.