When you invest in a mutual fund now, look for a largest tax-loss carryforward from 2008. The information should be in the fund’s latest annual or semi-annual report, available on the fund company’s website.
Such funds can deliver years of tax-free gains. However, you get tax-deferred gains in an IRA or 401(k) anyway. To get tax advantages from funds with large tax-loss carryforwards, you should hold them in a taxable account.
Even in a taxable account, funds with large tax-loss carryforwards will provide tax shelter only if you hold onto your shares. If you sell shares you’ll have tax consequences: a capital gain or loss.
Therefore, part of your investment strategy should be to sell funds or other securities trading at less than your purchase price. By realizing capital losses, you’ll be in a position to shelter gains you may realize after stocks and stock funds rebound.