Tax-saving investments | Vanguard (2024)

FAQs

Is VTMFX a good investment? ›

VTMFX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance. VTMFX is one of many Zacks' Allocation Balanced mutual funds to pick from.

You can save tax by investing in tax saver Fixed Deposits which can fetch you tax deduction under section 80C of the Indian Income Tax Act, 1961. You can claim a deduction of a maximum of Rs. 1.5 lakh by investing in tax saver fixed deposits.

Choosing investments with built-in tax efficiencies, such as index funds—including certain mutual funds and ETFs (exchange-traded funds)—is one way to minimize the tax drag on your returns. ETFs may offer an additional tax advantage. The way their transactions settle allows them to avoid triggering some capital gains.

Stocks and Funds That Pay Dividends

Dividends are not a bad thing, but they are considered taxable income in the year you receive them. If you're invested in stocks or funds that generate a lot of dividend income, your current-year tax bills may be high.

Money market accounts, certificates of deposit, cash management accounts and high-yield savings accounts all carry FDIC insurance. Treasury bills, notes and bonds are backed by the U.S. government, making them another low-risk investment option.

The fund has returned 6.12 percent over the past year, 3.80 percent over the past three years, 6.09 percent over the past five years and 6.43 percent over the past decade.

Use tax-advantaged accounts

Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes at all on the assets in the account. You'll just pay income taxes when you withdraw money from the account.

How long to hold stock to avoid tax? ›

Generally, any profit you make on the sale of an asset is taxable at either 0%, 15% or 20% if you held the shares for more than a year, or at your ordinary tax rate if you held the shares for a year or less. Any dividends you receive from a stock are also usually taxable.

ELSS funds are equity funds that invest a major portion of their corpus into equity or equity-related instruments. ELSS funds are also called tax saving schemes since they offer tax exemption of up to Rs. 150,000 from your annual taxable income under Section 80C of the Income Tax Act.

Reinvested dividends may be treated in different ways, however. Qualified dividends get taxed as capital gains, while non-qualified dividends get taxed as ordinary income. You can avoid paying taxes on reinvested dividends in the year you earn them by holding dividend stocks in a tax-deferred retirement plan.

Given that much higher return potential, investors should consider automatically reinvesting all their dividends unless: They need the money to cover expenses. They specifically plan to use the money to make other investments, such as by allocating the payments from income stocks to buy growth stocks.

Actively managed funds can add value to your portfolio because they offer an opportunity for outperformance. But be mindful—there's also the possibility they may underperform.

The fund's risk compared with that of other funds in this category is considered average by Morningstar for the trailing three-, five- and 10-year periods. The level of return is deemed high compared with its peers' for the corresponding periods.

Over the past 75 calendar years, Franklin Income Fund–Class A (Without Sales Charge) has had positive returns in 60 years (80% of the time) and 15 years of negative returns. Additionally, if you look at the periods following down years, you'll see how well the fund rebounded.

Overall, T. Rowe Price Equity Income Fund ( PRFDX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.