I just couldn't resist the temptation! Here I am with just a few days left in a great investment year, preparing to tell my clients the good news about Spectacular Realized Capital Gains, Above Average Growth in Working Capital, and increasing "Base Income", when an article in the New York Times Sunday "Money" section smacks me up along side the head! I've got this all wrong. I'm supposed to lose money for people so that they never have to pay taxes!

 

If you get a chance to waste some time before the end of the year, please read the Mutual Fund column on Page 7 of the December 19th Money Section and make your New Year's Resolution to never ever own another open end Mutual Fund! Some of these funds have the audacity to send out Capital Gains Distributions, causing a tax burden for shareholders in taxable accounts. Most Mutual Fund Investors are more fortunate. Their funds have lost so much money during the past five years' rally in investment grade securities that they won't have to worry about paying any taxes on investment gains for years to come!

 

Just what is investing all about? I must be missing something. Identify a good prospect for your investment portfolio; allocate a reasonable sum of money to it; establish a reasonable profit objective; pull the trigger; smile in appreciation of your own brilliance! That's it. Investing is easy.  Now the Times writer has a different view of the situation. His idea is that profits and income are the enemy, and that no return at all is better than a positive return that has been reduced a bit by taxes. His 3rd grade Math Teacher must be pulling her hair out!

 

Once and for all people, to succeed as an investor, you must alter your concept priorities. Capital Gains are KING, and short term profits are a much more powerful monarch than the long term variety. (You have heard of compounding, right?) Next on the list is regular, recurring INCOME in the form of Dividends, Interest, salaries and bonuses. Would you ever ask for a cut in pay? Buy and Hold, Wait for Next Year, and Tax Losses do not exist in a successful scenario. If you must invest in taxable accounts, pay your taxes as you go, gleefully, and place an increasing portion of your winnings in tax exempt bonds. Then there won't be any (taxes) at all to pay when you get to retirement age.

 

Remember, there's no such thing as a bad profit...or a good loss.