WHAT'S NEW? Our Latest Updates!

Viva la Revolution!

05/09/06 -

Newly elected socialist/populist Bolivian President Evo Morales sent military troops to natural gas facilities on May 1st, claiming state control over the country’s resources. Oil companies were given 180 days to renegotiate contracts with the country – almost literally at gunpoint.

Such a move is bad for the global “oil imperialists” of the world like Exxon Mobil, Petrobras and Total S.A. It doesn’t bode well for investors in Latin American mutual funds like T. Rowe Price Latin America (PRLAX) – our current Latin American fund category favorite.

When socialism is on the march it’s best to get your money out of the way.

Oils Well That Ends Well

In case you’ve missed the nonstop media coverage, gasoline prices are again approaching $3 a gallon. Does this “crisis” situation offer any investment opportunities? Can it derail the economy and stock market? And why is gas so expensive anyway?

A Gusher of a Bad Idea

04/28/06 -

A lot of good has come out of the exchange traded fund (ETF) revolution. ETFs have drawn billions of hot money dollars out of ordinary mutual funds, helping longer-term mutual fund investors’ returns by giving the fund manager a more stable asset base. ETFs are more tax-efficient than ordinary mutual funds. Even better, low-cost ETFs have put some pressure on fund fees.

Ask MAX: Capital Gains Quickies

04/24/06 -

Andrew from Minneapolis asks: 'I'm a mutual fund investor who was hit with taxes on my fund holdings this year (after a few years without paying any). Frankly, I'm not entirely clear on what a capital gains distribution is. I asked my accountant and he didn't seem to be able to explain it to me. Can you help?'

In most cases, mutual fund investors haven't had to worry about their fund’s tax bills since 2000. Weak market returns from 2000-2002 meant that there weren't any capital gains to distribute in the early part of the decade, and the losses many funds realized offset some of the gains made in the following years. But strong performance of many funds from 2003 to 2005 has finally caught up with fund investors, creating a rough tax burden for many of them this year. In 2005 Lipper estimates fund investors paid a whopping 58% more in taxes on fund distributions than in 2004.

We love mutual funds. Mutual funds provide cheap and easy investment diversification, they're easy to get in and out of, they're highly regulated, and they allow investors access to expert financial guidance at a low price. As investments go, we think that mutual funds are far and away the best available for the vast majority of investors in America.

But there are a couple of things about mutual funds that we don't like: Fund investors never know exactly what they're invested in, some mutual funds charge excessive fees, and worst of all, mutual funds sometimes hit investors with large and unexpected taxable distributions.

march 2006 performance review

Bonds took a dive in March. The roughly 3.5% hit to long-term treasury bonds was the worst hit to bonds since April 2004. The Federal Reserve’s rate-increasing campaign to fight inflation (inflation they may have created) finally caught up with longer-term bonds.

Ask MAX: We Aren't Married, Will She Owe Taxes When I Die?

04/13/06 -

Ron from Atlanta asks: 'I'm 62 years old and am not married but I have lived with my girlfriend for over 17 years. She is the main benefactor in my will (which includes a house and a decent-sized mutual fund portfolio), and I plan on leaving her my IRA assets. Will she be required to pay taxes on those assets?

Stuffy old Uncle Sam still doesn't give his full blessing to unmarried couples.

When married people die, they may leave their spouse an unlimited amount of assets free of federal estate taxes. That's called the marital deduction.

Unmarried couples do not receive an unlimited marital deduction, and therefore your girlfriend could be due a nasty tax bill after you leave this mortal coil.

Your estate is the total value of all of your assets, less any debts, at the time of your death.

If you died tomorrow and your assets total less than $2 million (the current federal estate exemption, increasing to $3.5 million in 2009), your girlfriend won't have to pay anything by way of taxes.

If you want to leave an IRA or property in excess of the exemption, it will trigger the dreaded estate tax - currently as much a 46% of the estate's value.


Oddly enough, the mundane (and molasses-in-winter slow) market events tend to hurt investors more over the long haul than sudden drops. Even adjusting for inflation, investors lost far more in 2002 than they did in 1987 - the year of the biggest one-day market decline in history.