How To Protect Your Millions Against Taxes

How can I protect my millions against taxes?

The best way to protect your millions against taxes is to invest in things that don't trigger a lot of capital gains on an annual basis. For example, we've talked about how diversification and investing in mutual funds are great ideas because somebody else is managing your money, you're invested in a pool of stocks and bonds, and you've spread your risks around. Great ideas, but the downside of investing in them can be that at the end of the year, the money that this particular mutual fund has made gets paid back to you as a capital gain. And you find out that without even having sold the investment, you owe taxes on it. So you want to look for funds, investment vehicles, that are not going to trigger taxes in the short term. And there's a number of ways you can do that. You can look for mutual funds, index funds in particular do not have a lot of capital gains because they tend to own the same pools of stocks forever. You can also look for - there's a category of investments called Exchange Traded Funds that are more like mutual funds and individual stocks in the sense that you buy them once, and until you sell them, you're not going to owe any capital gains. And you can look for mutual funds that just don't trade a lot and have very low tax ramifications. And make sure in a particular year before you sell an investment, think about, talk to your accountant, think about what the tax ramifications of that are. Because even though capital gain taxes have been lowered to 15 percent, you could end up owing quite a lot of money of that return you've been so happy about getting, in taxes.