Tax Efficiency

AAA

DEFINITION of 'Tax Efficiency'

An attempt to minimize tax liability when given many different financial decisions. There is a wide variety of tax-efficient vehicles, including tax-efficient mutual funds, irrevocable trusts and tax-exempt commercial paper.

BREAKING DOWN 'Tax Efficiency'

Choosing the best tax-efficient investment can be a daunting task for those with little knowledge of the different types of products available. The best decision may be to contact a financial professional to determine if there is a way for you to make your investments more tax efficient.

RELATED TERMS
  1. Tax-Exempt Commercial Paper

    An unsecured short-term loan, usually issued to finance short-term ...
  2. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  3. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
  4. Tax-Efficient Fund

    A mutual fund in which structure and operations are based on ...
  5. Tax Exempt

    To be free from, or not subject to, taxation by regulators or ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
Related Articles
  1. Retirement

    Immediate Annuities: More Income and Lower Taxes

    These instruments may shed their bad rap to bring you a hefty tax break.
  2. Taxes

    Using Tax Lots: A Way To Minimize Taxes

    The method of identifying cost basis can help you to get the most out of reduced tax rates.
  3. Taxes

    Minimize Taxes With Asset Location

    Learn how to maximize your investment returns with this tax-minimization strategy.
  4. Mutual Funds & ETFs

    Top 5 Chinese Mutual Funds

    Learn about some of the most popular and best performing mutual funds that offer investors exposure to the important emerging market economy of China.
  5. Investing Basics

    What is a Settlement Date?

    A settlement date is the day a security trade must be settled.
  6. Investing Basics

    Explaining Risk-Adjusted Return

    Risk-adjusted return is a measurement of risk for an investment or portfolio.
  7. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  8. Professionals

    Index or Target Dates in 401(k)s: Which is Better?

    A common question is whether or not plan participants should choose index or target date funds in a 401(k). The answer depends on different scenarios.
  9. Investing

    6 Reasons Why Every Investor Should Consider ETFs

    Once you understand the benefits of ETFs, you’ll see how they could be an exciting and smart way to help meet your financial goals. Here some key facts.
  10. Term

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
RELATED FAQS
  1. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  2. What action is the SEC likely to take on 12b-1 fees?

    The Securities and Exchange Commission (SEC) may take action to impose greater regulation on how 12b-1 fees are used, or ... Read Full Answer >>
  3. What is considered a reasonable 12b-1 fee?

    A reasonable 12b-1 fee is generally considered to be 0.25% of the assets of the mutual fund. The maximum amount allowed for ... Read Full Answer >>
  4. What are some of the most common mutual funds that give exposure to the retail sector?

    There are a number of mutual funds that give exposure to the retail sector. Three of the most popular funds are the Fidelity ... Read Full Answer >>
  5. What is the 12b-1 fee meant to cover?

    A 12b-1 fee in a mutual fund is meant to cover the fees of companies and individuals through which investors of a fund buy ... Read Full Answer >>
  6. What are the most popular mutual funds that give exposure to the utilities sector?

    Some of the most popular mutual funds that provide exposure to the utilities sector include American Century Utilities, Prudential ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  2. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  4. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  5. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  6. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!