T-Series Funds: "T" is for tax-efficient

Successful investing relies on many factors, including employing tax-efficient strategies.  T-Series Funds are mutual funds that are designed to be tax-efficient. In fact, the "T" stands for tax and implies they are tax-efficient.

If you need a tax-efficient monthly income stream from your investments, without sacrificing the potential for capital gains, T-Series Funds could be for you. Designed for non-registered accounts, T-Series Funds are becoming increasingly popular. They are attractive to investors because they distribute return of capital (ROC), which is not immediately taxable.

When mutual funds make payouts in the form of interest, dividends or capital gains, they are taxed in the same year they are distributed. But the distributions from T-Series Funds are not taxed until your investment capital is depleted – in other words when the adjusted cost base (ACB) reaches zero – or until the units are sold.

This ability to defer taxes is one reason why T-Series Funds are considered tax-efficient. The other reason is that when the distributions are taxed, they are treated as capital gains, which are taxed at rates lower than interest income.

A fund that gives you control over when you incur a tax liability, allowing you to defer taxes, can be beneficial in several ways. You will benefit from higher after-tax income and the compounding effects of a larger investment. Plus, you may also be able to reduce the amount of tax you pay in the future, due to lower marginal tax rates or lower capital gains inclusion rates.

When considering T-Series Funds, look at payout rates, as they vary. Also look for T-Series Funds that make investment sense: Poor returns will result in smaller monthly distributions. Some funds are designed so that the ROC distribution takes up all or most of the expected return, enabling you to maintain your original investment in the fund.

As an added bonus, T-Series Funds that are part of a corporate class structure allow you to switch between asset classes without triggering a capital gain.

Finding the right investment vehicle for the right investor is part of the art of financial management. The flexibility and convenience of T-Series Funds could be ideal for you.

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