# Fund vs. Direct Investment - Tax and Other Issues



## bellenuit (29 January 2010)

I know this topic has probably been through the fires many times in the past, but I am interested in it from a different perspective. We are all aware that funds provide easy diversification and should provide expert management etc. What I am interested in is whether it is better tax wise or return wise to hold the same investments as the fund directly or through the fund.

Most funds publish the stocks that they hold and relative percentage invested in each stock. If one had a $100K and were to invest it directly in the top 10 (for simplicity) holdings of a particular fund in roughly the same percentages as the fund, does this provide any advantages/disadvantages over putting the $100K directly in the fund. 

One obvious advantage is the saving on management fees and entry/exit fees. One disadvantage is not having the expertise of the fund manager to make decisions. One can always adjust one's holdings to bring it back in line with the fund allocation when that changes, but it may be months after the reallocation by the fund manager that one becomes aware of such changes.

But there are other differences. As a direct holder you become entitled to participate in capital raising offers made from time to time by the company which can be lucrative. On the other hand the fund often gets to partake in these same offers under better terms than the retail investor.

Are there tax advantages/disadvantages worth considering? Other issues?


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