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Newspaper Archive of
Jewell County Record
Mankato, Kansas
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February 6, 2003     Jewell County Record
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February 6, 2003
 

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tee yourself from taxes Did you know? A person in the highest federal, stale and local tax brackets in New ~0rk City loses almost om,-half of his or her invest- ment yield to taxes." It's no secret that taxes call eat up a considerable amount of the interest you earn on your investments. So how can you keep more of tile interest your investments earn? 'lhx-free investments may be a good way to lighten your tax burden while t'urther diversit~'ing your porttolio. Tax-free mutual funds If you want to diversify your bond portfolio but don't want to buy a legion of individual bonds~ you can purchase shares in a bond mutual fired. These tunds normally invest in 30 to 100 municipal bonds, giving yon instant diversification. Also, in most cases, your initial investment can be smaller than $5,000. Ill addition, receive a fixed interest rate. Purehasing shares of a unit investment trust would be an option tor you. With a unit trust, you get a fixed rate of interest and the added benefit of diversifcation in seven to 20 tax-free bonds. Plus, tax- tYee unit trusts pay investors a monthly check. They do, however, generally yieht Jess than individual bonds. It is important to note that tax-free mutual finns and unit trusts may be subject to the ahernative minimum tax as well as state and local taxes. In addition, the return and principal value of nmnicipal bonds, mutual hinds and unit trusts will fluetuate based on current market conditions. Taxable vs. tax-free Because of the tax advantages they offer, tax-free investments often provide significantly more alter-tax income than comparable taxable invest- ments paying higher interest rates. The chart below compares the taxable yields necessary to match the return on tax-free bonds after payment of federal income tax. tax-free mutual hinds pay you monthly income; howew~r, 4.0% the amount of your payment is not fixed. \\ Tax-free unit investment trusts Maybe you're interested in tile diversification of a mutual fund, but you'd rather You may not want to overlook the benefits of tax-free investing. If you want to free yourself from taxes, contact your investment-representative for more information on these and other tax-advantaged investments.. *Source: IFDS Web site, www.ifdsgroup.com MARGINAL 15% 27% 30% Tax-free Yiekl TAXABLE EQUIVALENT YIELD 35% 5.57% 6.15% 8.22% 8.57% This example does not represent current availabl~yates. 7.14% :7.69% 8.46% 8.96% 9.23% 9.77% Buy and hold fo r I owe r taxes Successful investors understand the I)enefits of buy-and-hold investing. Choosing high-quality investments and [aolding them ln(,rt as( ~ Your success, for the long term not only " .... s. chances for it also reduces your taxes. But keep in mind that there are risks associated with mutual fund and individual stock investing, such as losing money. a porttolio of attractive stocks. Look for funds that subscl to a long-term, buy-and-hold strategy. Ask your investmel representative or your fund's shareholder representative fund's "turnover rate." Turnover measures how much tr~ occurs in a portfolio, The lower the turnover rate, the lo~ the capital gains taxes. If you sell an investment after holding it less than one year, any gain is taxed at your ordinary income rate, which may be as high as 38.6 percent. But hold that investment tor at least 12 months, and your gain is taxed at 20 percent. Avoid mutual fund turnover. Although you can control when you buy and sell individual stocks, you don't have the same control with stock mutual fimds. If your mutual fund manager buys and sells frequently, you could be sacrificing long-term returns to capital gains taxes. That doesn't mean you should avoid mutual funds. They offer professional mauagement and broad diversifcation, making them a conw~nient and aftordable way tor some investors to own Diversify. If you have a large portion of your porttolio invested ill eompany, you might consider selling some of your shares diversify your pordolio. You will owe capital gains taxes,"~' ht But the move could reduce the impact that an adverse development could have on your entire portfolio. Selling stocks simply to take advantage of lower long-ter capital gains taxes is not a good idea. But if the outlook a company whose stock you own has deteriorated, or if se would improve your portfolio's overall diversification, it It be a good time to take advantage of low, long-term capit~ gains tax rates. Contact your investment representative for a free porttolio review. [eial seeu ~bor, less Y they w e there Year ret rstarid :ial requ e in the ral finan :st that: 'rcent t 3re-retin nding ol to main ard of li Edwar , no-obli an help nOunt o eed in 'r~ 2 A D V E R T I S E M E N T ?!