Stocks Allow You to Control Uncle Sam's Take

This is perhaps the best reason for fund investors working within taxable accounts to consider stocks: to control their tax destinies.

Here's why

Because mutual funds are required to distribute capital gains that their managers incur during the course of the year, fund investors often receive taxable distributions that they didn't want—or weren't prepared for.

How stocks help

But when you invest directly in stocks, you control when you buy and sell your holdings. As a result, you have more power over your tax tab. You can sell your losing stocks—and you'll more than likely have losers to sell—to offset distributed gains from your mutual funds.