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Up Front: ON THE FUND FRONT
YOUR MONEY'S NO GOOD HERE
NO MORE INVESTORS, PLEASE, until January. And it's for their own good. A group of three mutual funds won't accept new accounts in November and December, since investors would get zapped by the tax collector. The trio, sponsored by the Markman Multi Fund Trust, only started Feb. 1, and the goodwill created by this gesture is meant to improve sales later.
The tax trap stems from distributions of dividends and capital gains made at yearend. Markman expects them to range from 5% to 10% of net asset value. Say you buy a fund for $10 a share in December. The next day, the fund distributes $1 of that to investors, and the price goes down to $9. You're stuck with the same tax liability as the investor who months ago bought at $7--and you may be better off waiting until January to buy at (assuming no big market moves) $9.
Minneapolis-based Markman's approach draws frowns from pros in the rest of the mutual-fund industry. They believe that investing for growth supersedes tax concerns that accountants can worry about.
Markman's threesome invests in other mutual funds, not stock directly. They're up 32% (Aggressive Growth Fund), 21.5% (Moderate Growth), and 15.5% (Conservative Growth) through Sept. 30. Markman isn't exactly turning away investment dollars, however. All yearend investments go into its money-market fund, then on Jan. 1 move to a reopened fund.Sunita Wadekar Bhargava Edited By Larry Light, with Paul Eng