Scared off from investing by the mutual-fund scandals? You can reap the tax advantages of mutual funds by investing in other tax-advantaged vehicles. Here are your best five options, plus an explanation of their tax benefits:
1. Buy individual stocks. This is the simplest route. You won't have any problems with late trading or market timing if you buy shares of IBM, Pfizer, Wal-Mart, etc. Pick at least 10 different stocks from different industries to create diversification.
As long as you simply hold onto your shares, you won't incur taxable gains. If you collect dividends or take long-term gains, you'll owe only 15 percent in tax (5 percent in a low bracket). Moreover, you can pull tax-free cash from your portfolio via margin loans, which may be an attractive strategy while interest rates are low.
2. Wrap it up. You might not want to pick your own stocks. Not to worry: Your friendly broker can put you into a...(register to read more)
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