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Watch Out!

The government's going to pick the pocket of your mutual fund.

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This story appears in the November 2000 issue of Entrepreneur. Subscribe »

If there's one ugly aspect of mutual fund ownership, it's the complicated, and sometimes expensive, tax situation this pooled investment product presents for its shareholders every year.

Uncle Sam's long arms can be an eye-opener for new mutual fund shareholders. If you own individual stocks, you're in charge of deciding when to sell your stocks and trigger a taxable event based on your call; but if you're a shareholder of a mutual fund, that power is out of your hands.

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