Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
Mutual funds and ETFs have differences that clients should know before holding them, according to the Huffington Post. For example, investors can trade ETFs on the open market but sell their mutual fund shares back to the company. Gains from mutual funds every year are subject to capital gains tax even if investors opt to keep them, while profit from ETFs is taxed only when the funds are sold. -- Huffington Post
Good tax professionals advise clients to structure their holdings so they don't get a refund at all. However, receiving a refund can be advantageous in some instances, according to NerdWallet. Clients may want to spend the money on a big purchase or open an emergency fund. They can also pay down debt or make investments. -- NerdWallet
The Coverdell Education Savings Account is increasingly becoming a good alternative to the 529 plan for clients who want to save for education, according to U.S. News & World Report. The account offers wider investment options and can be used to fund college, post-graduate and K-12 education. Meanwhile, withdrawals are not taxed when used for a qualifying expense. -- U.S. News & World Report.
Striving to build a portfolio for maximum returns and minimum risk may not be the best goal for clients, according to MarketWatch. Investors who pursue a perfect portfolio tend to get into more trading deals, face higher fees and taxes, and end up with lower returns. Instead of seeking the optimal portfolio, clients are advised to aim for a portfolio that is rebalanced to achieve an appropriate risk profile. -- MarketWatch
