tax-efficient fund(redirected from Tax Efficient Fund)
A mutual fund that invests in securities thought to give fund shareholders the least possible tax liability. Common securities in which a tax-efficient fund invests are municipal bonds, which are usually tax-free, and non-dividend paying stocks, which reduce a shareholder's capital gains tax liability. Tax-efficient funds often retain stocks in which they invest, as stocks held for more than a year are taxed at a lower capital gains rate. They are often thought of as an alternative to tax-deferred investment vehicles, such as 401(k)s and IRAs.
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A mutual fund that manages its investment portfolio so as to minimize the tax liability of its shareholders. A tax-efficient fund attempts to minimize capital gains distributions by reducing portfolio turnover and to minimize dividend payments to shareholders by concentrating on investments in companies with low dividend payouts.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.