Many a stock fund flew high in the New Era bull market and then crashed. There's a little bit of happy news for investors in these catastrophes: The funds have tax losses. That means they can book terrific gains without having to dump taxable dividends on their shareholders. Tax advantages come in two forms. One is a tax-loss carryforward Say the fund sold $60 million of Amazon last year that it had bought for $100 million. The $40 million capital loss cannot be passed through to fund investors (that's one of the unfair things about mutual fund taxation). Instead, this loss sits around and can be used to shelter any gains.
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