When considering mutual funds to invest in, the taxation of fund earnings is a very important consideration. After all, it's not what you earn that matters, but what you keep after taxes. When your objective is to minimize taxable distributions, select mutual funds that minimize income and capital gains distributions. This can be done through low portfolio turnover, such as index funds, or through a deliberate tax-efficient investment strategy (e.g., the fund manager plans offsets of portfolio gains with losses). Some funds of this type have the words "tax-efficient" or "tax-managed" in their title. If a mutual fund has the objective of minimizing taxes, this will also be described in the fund's prospectus.
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