Choose wisely. There is only one correct answer to each question.
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1.
Investing from a tax perspective often contradicts its practicalities. One example of why is that _______.
Investors often hold long-term stocks in tax-sheltered accounts even though those stocks are taxed at low capital gains rates. From a tax perspective, it doesn't make sense to do this. But practical reasons override that.
2.
Which investments do an effective job of restraining capital gains distributions?
All of the above. All of these investments are structured in such a way as to keep the lid on capital gains distributions.
3.
In general, which investments below are not good choices for tax-sheltered accounts?
Non-dividend paying stocks. Long-term capital gains, which is what you have when you sell a stock that you've held for at least a year, are taxed at a much lower rate than is bond income or dividends.
4.
Mutual funds with a lot of turnover are best for _______.
Tax-sheltered accounts. Mutual funds with a lot of turnover generally generate a load of capital gains that investors cannot control, and are therefore best suited to tax-sheltered accounts.
5.
If you're holding cash in an emergency fund, makes sense to place it into _______.
A taxable account. If you're holding cash for near-term income needs or as an emergency fund, it makes sense to hold it in a taxable account because you may need access to the cash quickly and without penalty.
