investing – The Well Tempered Investor

Buying a home started to be accessible for many Americans in the 1950s with the introduction of the 30-year mortgage. The economic and political dominance of the US in the post World War II era also provided buyers with a favorable environment for homeownership. However, in recent years, it has become increasingly unattainable for many due to the disproportionate rise of home prices relative to incomes. In the current environment, aspiring homeowners must conduct an honest and realistic assessment of their situations, since buying a home exceeding their means can have financially detrimental consequences.

Although homeownership in recent decades has been seen as a common milestone in one’s life, making a decision to buy a home is complex, and can be challenging. It requires a careful consideration of various factors including location, price, interest rate, and monthly mortgage payment, among others. What is evident is that buying a home is no longer for the average person.

One of the important aspects of investing is the impact of tax consequences. When investors sell stocks and funds for profit, they are likely aware that these transactions create taxable events. However, they might not be often aware that fund managers also realize capital gains, which are passed on to investors. This means investors are taxed multiple times from the same fund: when they sell it for gains, and when the manager sells stocks within the fund for gains.

This risk for the increased tax burden arises notably from closed-end mutual funds (henceforth referred to as mutual funds), which are portfolios of stocks which could number in thousands. They settle at the end of each trading day, and the fund company is responsible for managing the buying and selling of stocks within the funds.

Tag: investing

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