What Is a Tax-Managed Mutual Fund?

Executive summary:

  • Tax-managed investing can help reduce the bite that taxes take out of a portfolio
  • Investment taxes are triggered by different types of gains and distributions
  • Tax-managed mutual funds are designed to minimize taxable distributions

There are many buzzwords and phrases in our industry and one of the most commonly used over the past few years has been "tax managed." It's quite likely you've seen that phrase in our blogs and on our website: At Russell Investments we strongly believe that no one should pay more taxes than they need to. And we equally strongly believe that a major component of an advisor's value comes from their efforts to help their clients minimize the taxes they pay on their investments.

After all, as we've noted time and time again: It's not what you make, it's what you get to keep. That's where the "tax managed" aspect comes in. Managing for taxes throughout the investment process can reduce the taxes payable on a portfolio, thereby theoretically leaving more money available to grow and compound. You can probably intuitively understand the concept of "tax managed." But what does it really mean?

Read on as we dig into the nuts and bolts of tax-managed investing, define a tax-managed mutual fund, and describe how Russell Investments approaches tax-managed investing.