You’re Facing a Big Tax Bill If You Hold These Mutual Funds

What’s worse than watching your mutual fund investments decline in value? Getting hit with a big tax bill too.

That’s the reality some Americans are facing this year as the deadline to file taxes approaches. It’s largely a function of how actively managed mutual funds operate: Portfolio managers buy and sell securities within the fund to reposition their strategies, and many did so in 2022’s volatile market.

After a years-long bull market, many stocks in mutual funds had increased in value since they were purchased, despite the S&P 500’s 19% drop last year. That means they were subject to capital gains taxes when they’re ...