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.

INVESTOPEDIA EXPLAINS '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. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
  3. Tax Liability

    The total amount of tax that an entity is legally obligated to ...
  4. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  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 FAQS
  1. How do no-load funds typically perform relative to load funds?

    No-load mutual funds are pooled investments that do not carry an upfront sales charge when purchased or a deferred sales ... Read Full Answer >>
  2. What are the most popular mutual funds that invest primarily in the insurance sector?

    Under the purview of the financial services industry, the insurance sector is an attractive investment option for mutual ... Read Full Answer >>
  3. How should I use portfolio turnover to evaluate a mutual fund?

    The portfolio turnover percentage can be used to determine the extent to which a mutual fund turns over its stocks and assets ... Read Full Answer >>
  4. What are the risks involved in a banker's acceptance?

    College savings accounts are excellent ways to encourage saving for future college costs. Contact your investment professional ... Read Full Answer >>
  5. For what reasons are electronics stocks commonly purchased by a value investor?

    Administered by the Financial Industry Regulatory Authority (FINRA), the Series 6 exam – Investment Company and Variable ... Read Full Answer >>
  6. What is the difference between a modified duration and a Macaulay duration?

    Individuals have a handful of options for places to keep the funds they wish to keep guarded from the volatility and risk ... Read Full Answer >>
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. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.
  5. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  6. Professionals

    5 Signs That You Have a Lousy 401(k) Plan

    Knowing whether a 401(k) plan is good or not so good is important. This will help participants decide how much to invest and when to demand improvements.
  7. Professionals

    A Look at How the Ultra-Wealthy Invest

    Ultra-wealthy investors are cautious this year as they approach the markets. Many target mutual funds and stocks, but most also diversify their portfolios.
  8. Investing Basics

    What Does Overweight Mean?

    In the investing world, "overweight" refers to an expected stock performance, or a portfolio that is out of balance.
  9. Investing

    Portfolio Tips For Pursuing The Outcome You Want

    If you have a portfolio, you probably know why you’re invested. Whether it’s a 401(k) or a brokerage account, your portfolio serves some purpose.
  10. Fundamental Analysis

    Explaining Annual Returns

    Annual return is the standard percentage rate for most investments and credit facilities.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center