Smartt Fund Choices

In the midst of this challenging investment environment, John Smartt Jr., a CPA (but not a tax preparer) with the planning firm Financial Counseling & Administration in Knoxville, Tennessee, relies heavily on Vanguard’s Tax-Managed Capital Appreciation Fund (VMCAX), which he says is classified as large-cap growth by Morningstar, but actually is managed to the Russell 1000 blend. By contrast, Vanguard’s Tax-Managed Growth & Income Fund (VTGIX) is the “receiving fund” of choice, says Smartt, when he wants to move a client with a big loss in a mutual fund like the Vanguard S&P 500 Index fund to a fund that carries a large embedded tax-loss carry-forward. “The issue, generally, is the extent of early exit fees payable versus the amount of the tax loss generated. I have recommended that my clients not pay the 2% exit fee (in the first year of ownership), but it is okay to pay the 1% fee in years two through five.”