货币英语 13 Can You Lose When You Gain?

By Laura Adams.

This episode is about the advantages and disadvantages of investing in mutual¹ funds.
Taxes on Top of Losses
As we all know, many people have lost investment money due to the stock market volatility² in recent weeks. It’s been a tough time for the vast majority of investors⁴. But what’s really tough is losing money in your mutual fund, and then having to pay taxes on that losing investment! Let me explain…
Even though many mutual funds have suffered big losses, some still have capital gains. A capital gain is simply the difference between the amount you pay for a capital asset when you buy it, and the amount you receive for that investment when you sell it. If you make a profit from the sale, you have a capital gain that’s taxable. It you lose money from the sale, you have a capital loss. Capital gains are allowed to be offset⁵ by capital losses.
Phantom⁶ Gains are Scary
A situation where you owe tax even if you experience a negative return on investment is called a phantom gain. No, that’s not a left-over joke from Halloween! Phantom gains are common in a down market, like we’ve experienced lately. They can occur when investors decide to get out of a declining fund. If the investor³ wants to sell, the mutual fund may have to raise money to pay the shareholder⁷. The fund would do this by selling investments, even profitable ones.
Mutual Fund Overview⁸
If you’re not familiar with mutual funds, they’re companies that invest in stocks, bonds, money markets, assets, and other securities, or a combination of these. The investments that a mutual fund owns are called its portfolio⁹. It’s a convenient package of many individual investments that would be complicated for a typical investor to manage on their own. Mutual funds allow people without financial experience to easily invest small or large amounts of money.
Capital Gains Treatment
But there’s a big difference in how capital gains are handled with mutual funds versus¹⁰ with individual securities. When you buy and hold a stock, for example, you pay tax each year on what you earn. The income could come from interest earned or from dividends¹¹ received. But you don’t pay capital gains tax until you actually sell the stock and bank a profit. With mutual funds, this same information is true. But in addition to paying personal capital gains tax on shares you sell and profit from, you also have to pay taxes each year on the fund’s capital gains.
This is because U.S. tax law requires mutual funds to distribute capital gains to their shareholders¹². And these distributions are taxed at the long-term capital gain rate, no matter how long you’ve owned the shares. So if a mutual fund manager sells some of the underlying¹³ securities for a profit, which can’t be completely offset by a loss, they must pass the taxable gain along to shareholders. This happens even if the fund had poor performance after you bought it
Pros¹⁴ and Cons¹⁵ of Mutual Funds
Does this mean mutual funds are bad investments? Absolutely not. Mutual funds offer shareholders great benefits such as professional management, diversification¹⁶, liquidity¹⁷, affordability¹⁸, and convenience. But every investment vehicle has its pros and cons. I want to make you aware of a couple more disadvantages to mutual funds to simply keep in mind:
Most charge fees. Mutual funds can be expensive to operate. That’s why investors get hit with annual fees and sales commissions regardless of a fund’s performance. However, there are some no-load funds that can minimize management fees. If you feel comfortable investing without the services of a broker¹⁹, consider buying mutual funds directly from a no-load fund family to save on expenses.
Share prices are calculated just once a day. This is in contrast to an individual stock for which you can monitor price changes minute by minute, if you like, by checking websites such as etrade.com or scottrade.com. But because a mutual fund is made up of multiple securities, its price depends on the fund’s net asset value or NAV which is calculated at the end of the trading day. But if you rarely reallocate money, or buy and sell funds, within a fund family, this may not be a problem for you.
Mutual Funds and Tax-Deferred Accounts
One way to eliminate taxes on mutual fund distributions is to buy them within a retirement²⁰ account. This is because retirement accounts such as IRAs and 401(k)s are examples of tax-deferred accounts. That means your profits are not reported as capital gains. You don’t get hit with any taxes until you take your money out. At that time your profits are taxed as ordinary income, not capital gains.
Mutual Funds and Taxable Accounts
But if you own mutual funds outside of a qualified²¹ retirement account, be prepared for any possible tax liability this year. Many mutual funds ended their fiscal²² year at the end of October, so be on the look-out for their distribution estimates so you can plan accordingly.
Here’s a tip if you’re investing in mutual funds in a taxable account: consider waiting to buy more shares until after the fund has made any capital gains distributions for the 2008 tax year. I’ll put a link in the show notes to IRS Publication 564 which contains in-depth information about the taxes associated with investing in mutual funds.
For more information please check out this episode of The Winning Investor's show, which compares mutual funds with Exchange Traded Funds (ETFs).  And in a future episode, I'll cover some strategies for investing success.
Administrative²³

I’m glad you’re listening. Find a transcript²⁴ of this show as well as all contact information at moneygirl.quickanddirtytips.com.

Chi-Ching, that's all for now, courtesy of Money Girl, your guide to a richer life.

 

1 mutual   

adj.相互的，彼此的；共同的，共有的

参考例句：

• We must pull together for mutual interest.我们必须为相互的利益而通力合作。
• Mutual interests tied us together.相互的利害关系把我们联系在一起。

2 volatility   

n.挥发性，挥发度，轻快，（性格）反复无常

参考例句：

• That was one reason why volatility was so low last year.这也是去年波动性如此低的原因之一。
• Yet because volatility remained low for so long,disaster myopia prevailed.然而，由于相当长的时间里波动性小，灾难短视就获胜了。

3 investor   

n.投资者，投资人

参考例句：

• My nephew is a cautious investor.我侄子是个小心谨慎的投资者。
• The investor believes that his investment will pay off handsomely soon.这个投资者相信他的投资不久会有相当大的收益。

4 investors   

n.投资者，出资者( investor的名词复数 )

参考例句：

• a con man who bilked investors out of millions of dollars 诈取投资者几百万元的骗子
• a cash bonanza for investors 投资者的赚钱机会

5 offset   

n.分支，补偿；v.抵消，补偿

参考例句：

• Their wage increases would be offset by higher prices.他们增加的工资会被物价上涨所抵消。
• He put up his prices to offset the increased cost of materials.他提高了售价以补偿材料成本的增加。

6 phantom   

n.幻影，虚位，幽灵；adj.错觉的，幻影的，幽灵的

参考例句：

• I found myself staring at her as if she were a phantom.我发现自己瞪大眼睛看着她，好像她是一个幽灵。
• He is only a phantom of a king.他只是有名无实的国王。

7 shareholder   

n.股东，股票持有人

参考例句：

• The account department have prepare a financial statement for the shareholder.财务部为股东准备了一份财务报表。
• A shareholder may transfer his shares in accordance with the law.股东持有的股份可以依法转让。

8 overview   

n.概观，概述

参考例句：

• The opening chapter gives a brief historical overview of transport.第一章是运输史的简要回顾。
• The seminar aims to provide an overview on new media publishing.研讨会旨在综览新兴的媒体出版。

9 portfolio   

n.公事包；文件夹；大臣及部长职位

参考例句：

• He remembered her because she was carrying a large portfolio.他因为她带着一个大公文包而记住了她。
• He resigned his portfolio.他辞去了大臣职务。

10 versus   

prep.以…为对手，对；与…相比之下

参考例句：

• The big match tonight is England versus Spain.今晚的大赛是英格兰对西班牙。
• The most exciting game was Harvard versus Yale.最富紧张刺激的球赛是哈佛队对耶鲁队。

11 dividends   

红利( dividend的名词复数 )； 股息； 被除数； （足球彩票的）彩金

参考例句：

• Nothing pays richer dividends than magnanimity. 没有什么比宽宏大量更能得到厚报。
• Their decision five years ago to computerise the company is now paying dividends. 五年前他们作出的使公司电脑化的决定现在正产生出效益。

12 shareholders   

n.股东( shareholder的名词复数 )

参考例句：

• The meeting was attended by 90% of shareholders. 90%的股东出席了会议。
• the company's fiduciary duty to its shareholders 公司对股东负有的受托责任

13 underlying   

adj.在下面的，含蓄的，潜在的

参考例句：

• The underlying theme of the novel is very serious.小说隐含的主题是十分严肃的。
• This word has its underlying meaning.这个单词有它潜在的含义。

14 pros   

abbr.prosecuting 起诉；prosecutor 起诉人；professionals 自由职业者；proscenium （舞台）前部n.赞成的意见( pro的名词复数 )；赞成的理由；抵偿物；交换物

参考例句：

• The pros and cons cancel out. 正反两种意见抵消。 来自《现代英汉综合大词典》
• We should hear all the pros and cons of the matter before we make a decision. 我们在对这事做出决定之前，应该先听取正反两方面的意见。 来自《简明英汉词典》

15 cons   

n.欺骗，骗局( con的名词复数 )v.诈骗，哄骗( con的第三人称单数 )

参考例句：

• The pros and cons cancel out. 正反两种意见抵消。 来自《现代英汉综合大词典》
• We should hear all the pros and cons of the matter before we make a decision. 我们在对这事做出决定之前，应该先听取正反两方面的意见。 来自《简明英汉词典》

16 diversification   

n.变化，多样化；多种经营

参考例句：

• The seminar was to discuss diversification of agriculture. 该研讨会讨论的是农业多种经营。 来自辞典例句
• Firm diversification is increasingly achieved by the means of takeover and merger. 通过接管和兼并，厂商经营范围日益多样化。 来自辞典例句

17 liquidity   

n.流动性，偿债能力，流动资产

参考例句：

• The bank has progressively increased its liquidity.银行逐渐地增加其流动资产。
• The demand for and the supply of credit is closely linked to changes in liquidity.信用的供求和流动资金的变化有密切关系。

18 affordability   

可购性

参考例句：

• Performance-Based Logistics Affordability: Can We Afford Categorical Conversion to Performance-Based Acquisition? 基于性能的后期的可承受性：能否担负得起向基于性能的采办的无条件的转变？
• There would be no crisis of affordability, as't for food or clothing. 就想食物与服装一样，因为供给没有危机。

19 broker   

n.中间人，经纪人；v.作为中间人来安排

参考例句：

• He baited the broker by promises of higher commissions.他答应给更高的佣金来引诱那位经纪人。
• I'm a real estate broker.我是不动产经纪人。

20 retirement   

n.退休，退职

参考例句：

• She wanted to enjoy her retirement without being beset by financial worries.她想享受退休生活而不必为金钱担忧。
• I have to put everything away for my retirement.我必须把一切都积蓄起来以便退休后用。

21 qualified   

adj.合格的，有资格的，胜任的，有限制的

参考例句：

• He is qualified as a complete man of letters.他有资格当真正的文学家。
• We must note that we still lack qualified specialists.我们必须看到我们还缺乏有资质的专家。

22 fiscal   

adj.财政的，会计的，国库的，国库岁入的

参考例句：

• The increase of taxation is an important fiscal policy.增税是一项重要的财政政策。
• The government has two basic strategies of fiscal policy available.政府有两个可行的财政政策基本战略。

23 administrative   

adj.行政的，管理的

参考例句：

• The administrative burden must be lifted from local government.必须解除地方政府的行政负担。
• He regarded all these administrative details as beneath his notice.他认为行政管理上的这些琐事都不值一顾。

24 transcript   

n.抄本，誊本，副本，肄业证书

参考例句：

• A transcript of the tapes was presented as evidence in court.一份录音带的文字本作为证据被呈交法庭。
• They wouldn't let me have a transcript of the interview.他们拒绝给我一份采访的文字整理稿。