Your Tax Report

There's no better way for investors to keep track of their taxation than Value Research Online investment-related

- Dhirendra Kumar

There’s a well-known saying in aviation: Takeoffs are optional, but landings are mandatory. This is a safety-related aphorism for pilots, which refers to the fact that if you feel something is wrong, you can always postpone or cancel a takeoff. However, once you have taken off, there is no choice – you have to land.

There’s a clear parallel to this in investments, and I’m sure you can guess what that is: Buying is optional, but selling is mandatory. Before you invest in something, you always have the choice to change your mind and not invest. However, once you invest, you will eventually have to redeem your investments. Why? Because the entire objective of investing is to sell your investment to make a profit ultimately. Investing is a means to earn money, and the act of making the investment only benefits someone else until it is sold for a gain. The end goal of investing is only achieved when the investment is converted back into cash upon sale.

Given this undeniable truth, it’s a little ironic how focused investors are on buying rather than selling. However, the final stage is actually missing here, and that is: paying taxes is mandatory. The recent change in debt fund taxation brought this point home powerfully. As you can read in this issue’s cover story, the tax changes that have been made may require some shifts in your strategy as a mutual fund investor. Otherwise, the exact same investments might boost your tax bill, and worse, may do so unexpectedly years later when these changes may have dropped from your attention.

Tax can never be ignored