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These Top-Rated Funds Have Been Tax-Efficient, Too

We screen for worthwhile offerings with low tax-cost and turnover rates.

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During and in the immediate wake of the bear market, it was easy to put tax considerations on the back burner. Gains were few and far between, after all, and funds had capital losses that they could use to offset their winning positions, thereby suppressing taxable capital gains.

However, investors won't be able to ignore taxes forever. Early March represents the three-year anniversary of the market's bottom, and the average equity fund has surged 21% on an annualized basis since then. Many funds have exhausted their capital losses, so investors should be on their guard for taxable distributions later this year and in the years ahead. Not only are capital gains distributions likely to become more plentiful, but they could cost you more, too: The long-term capital gains rate is set to jump from its current 15% rate to 20% for most investors in 2013.

Christine Benz does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.