Investors who own mutual funds that contain small company or foreign stocks may want to begin thinking of ways to minimize the tax jolt they may be facing come spring. Two ways are doing some smart timing on new investments, and taking a hard-nosed look at old ones that can be sold at a loss, according to the Centre Daily Times of Pennsylvania.

Overall, mutual funds are not likely to make especially large year-end capital gains distributions, said Paul Herbert, senior mutual fund analyst for Morningstar. However, some individual funds and certain fund categories may make sizeable distributions that could trigger a tax bill, unless the fund is in a tax-favored account such as an IRA or 401(k). The distributions are net profits earned on investments the fund manager sold during the year. If the investor uses the money to buy more shares, the payout is still taxable as a short- or long-term gain. Investors looking to invest in any funds this fall should find out whether it’s likely to make big distributions and might consider buying into a fund afterwards so the tax bill won’t be so high. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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