What are low turnover mutual funds?
Great question. If you are not familiar with mutual funds, invest five minutes with Dave by video under the question, “What Is A Mutual Fund?” first. A mutual fund buys and sells stocks inside the fund. Hopefully, it buys them low and sells them high, which creates a return for you as the investor. How often the fund buys and sells all of the stocks in the fund is called turnover. Aggressive funds may turn over their portfolio of stocks one or two times per year while other funds may sell only a few stocks per year, holding the rest long term. At the end of each year, the mutual fund reports how much money you realized (tax term) from the sale of stocks inside the fund. You pay ordinary income tax on these gains if not inside a retirement account. Low turnover mutual funds earn your return on investment by holding stocks long term instead of selling the stocks inside the fund. This results in less gain from the sale of the stocks in the fund, resulting in less tax paid on this sort of
