If you’ve been considering putting your money into a mutual fund, you may want to reconsider. Yes, mutual funds do have a place for investors, but it shouldn’t be the prominent one that they’ve established for themselves. Every year, the top rated funds are all still underperforming when compared to their benchmarks, they have high fees, and now, there are reports that the tax repercussions of these funds will be higher than ever before.
As of the middle of December, more than 79 percent of all mutual funds in the U.S. failed to beat their benchmark for the year, while at the same time still posting taxable gains for shareholders. This means that they are not hitting the numbers that their investors are told they should hit (Loss #1), and then investors are paying higher than normal taxes on what little they earn (Loss #2), all while still having to pay fees to the company and professionals running the fund (Loss #3). It ends up being much more costly to put your money here than most people are led to believe entering mutual fund ownership. The bad part of this is that even if you have not cashed out your mutual fund this year, you will still be responsible for the tax hit when you are doing your 2014 taxes. That is, unless you had the foresight to invest in a tax-deferred account.
To be sure, taxes like this do not happen all the time. The capital gains on mutual funds only occur if a fund needs to sell off a significant amount of assets in order to meet the needs of shareholders selling their stakes off. By law, if too much is sold, the profits go to shareholders and immediately count as a taxable gain for the year. Taxes are a fact of life, and short of committing a federal crime, there’s no way around them. However, you can make things a lot easier on yourself with a different approach to investing. Active trading helps you to reduce these unexpected fees for having someone else manage your money. For example, with binary options, there are no commissions to worry about, no hidden costs, and no penalties because your broker does something that you do not expect them to. Everything about binaries is up front; you know how much you stand to gain or lose before you enter the trade. And if these are taxable in your country (and they are in almost all countries), then you can account for this with ease before the trade takes place. There are no surprise tax papers in the mail based upon what the broker did. Everything that you need to know before tax season happens based upon your own decisions.
Perhaps this has been the biggest draw of binary options from the beginning. They boast of high rates of return, but they also have high loss rates, and for most, these tend to be pretty equal. A lot of people make money in binary options, but the overall average profit rate isn’t much different than it is in the Forex market. No, the biggest benefit of binary options for a good trader is the fact that there is more predictability in this market because you have more complete information before you begin. An advanced trader can use this fact to their advantage and make more accurate decisions when it comes to the amount of risk that you are taking on. When done right, this will only help boost your profit rate at the end of the year, even if someone with the same skill set were to go into a different type of trading. The advance knowledge lets you plan better and make better decisions.