Despite the dollars at stake, many investors lack a clear understanding of the impact of taxes on their mutual fund investments, particularly the fact that differences in fund investment strategies can produce markedly different tax consequences. Today's action addresses the gap between the importance of taxes to mutual fund investors and the knowledge that investors have about taxes. The following provides background information and more details on the Commission's action. Recent estimates suggest that more than two and one-half percentage points of the average stock fund's total return is lost each year to taxes. The size of the tax-bite depends on several factors, including the level of portfolio trading and the amount of gains realized on trades, as well as the degree to which the manager uses portfolio losses to offset realized gains.
Many investors lack a clear understanding of the impact of taxes on their mutual fund investments.
Format of Disclosure. The table will be accompanied by a short explanation of the returns presented. Formulas for Computing After-Tax Returns. Distributions are taxed at historical tax rates in effect when the distributions were made rather than rates in effect when the calculation is performed. Exemptions from After-Tax Return Disclosure.