Fund Spy

This Fine Fund Takes a Belt-and-Suspenders Approach to Tax Management

Adam McCullough, CFA
The following is our latest Fund Analyst Report for Vanguard Tax-Managed Capital Appreciation (VTCLX). Morningstar Premium Members have access to full analyst reports such as this for more than 1,000 of the largest and best mutual funds. Not a Premium Member? Gain full access to our analyst reports and advanced tools immediately when you try Morningstar Premium free for 14 days.

Vanguard Tax-Managed Capital Appreciation is an excellent choice for tax-efficient exposure to large- and mid-cap U.S. stocks. The fund's low fee, broad diversification, and effective tax management underpin its Morningstar Analyst Rating of Gold.

The fund seeks to track the Russell 1000 Index while minimizing the tax consequences. To manage taxes, portfolio managers underweight stocks with higher-than-average dividend yields and harvest capital losses to offset realized capital gains. Because dividend payments are taxed when they are distributed, a lower dividend yield reduces investors' tax bills. But this lower yield tilt could modestly hinder performance when dividend stocks are in favor.

Adam McCullough, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.