Expert: Doug Ingram - 1/23/2006

Question
I plan on investing some money for over 1 year so it doesn't matter if it is fluid.  I am familiar with money market savings and regular savings, but I want to earn more.  Are the income taxes on gains the same for bonds, mutual funds, and stocks if they are kept for at least a year.
Also what about if they are kept less than 1 year.

Answer
Donna,
This is really a better question for an accountant.
Bonds pay coupons that are taxed the same way as dividends on stocks.
Usually, mutual funds don't have a taxable event until they are sold - because you don't know if there willl be a profit or loss.
Bond mutual funds usually have higher dividends resulting from the coupon payments.
For actual gains or losses given a holding period, they should be treated the same, but the bonds should have more event income (from the coupons).
These days, muni bonds have some very competitive yields and the coupons are not taxed.  If that's a concern, look into it.  There are also non-taxable muni mutual funds.