Avoiding Unpleasant Surprises

-- LOOK for funds that aim to ease your tax burden. These include index funds, which distribute few capital gains, and managed funds with low turnover.

-- WATCH OUT for funds that are sitting on hefty unrealized gains. Invest now and you'll have to pay taxes on any distributions generated when the fund sells its holdings.

-- STEER CLEAR of funds entirely. Buy stocks, since you realize gains only when you choose to sell. Or try Standard & Poor's Depositary Receipts (SPDRs). They look like index funds but trade like stocks on the Amex.

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Updated Sept. 17, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.
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