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I was thinking about investing in the vanguard energy fund. What are the tax implications that I should consider?
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Before thinking about that fund, take into consideration it has a $25,000 minimum investment.
As far as tax implications go, if it's held in a tax-deferred account (401k, IRA, etc...) there are none. If held in a taxable account you may want to watch the yield since energy companies in general tend to pay off higher dividends. The fund has a yield of 1.6% which isn't bad. Another thing the fund has is a high potential capital gains exposure percentage of 52.6% which could lead to a high tax bill in the future. However due to the low turnover rate of the fund that shouldn't be a problem. Overall, the fund is real good tax-wise considering the sector it covers.The easiest thing of all is to deceive one's self; for what a man wishes, he generally believes to be true.
- Demosthenes -
I've already maxed out my tax deferred accounts like the roth. I wanted to make sure I don't have too much of a tax liability with that mutual fund.Comment
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You probably won't have too much of a tax issue with that fund but you'll have an issue with overexposure to that particular sector if you don't have diversification elsewhere.The easiest thing of all is to deceive one's self; for what a man wishes, he generally believes to be true.
- DemosthenesComment
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