If you hold mutual funds from a family named in the recent scandals, you should not bail out before considering the consequence:
* You might be abandoning a top-performing fund. For example, Federated Capital Appreciation Fund has returned over 12 percent a year for the past 10 years, among the best records of all large-cap funds. Do you want to withdraw your money from such a fund just because its parent, Federated Investors, has admitted that it allowed improper trading in some of its funds?
* You may owe taxes. Leaving a fund where you have a profit will trigger a capital gains tax. If you’ve owned the fund less than a year, you’ll have a short-term gain, taxed at your highest rate. If you move out of a top-performing fund, the tax bill may be enormous.
* You might owe fees. Some investors own “B” shares of a mutual fund. If that’s the case, you might owe a deferred sales charge if you move to another fund family. Fees and paperwork also might be involved in moving out of one 529 plan and into another.
