This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.

When a fund manager sells holdings for a profit, those gains are passed onto you, the investor, as a taxable distribution. If you then sell your fund shares, you might end up with a loss on paper, even though your overall wealth increased. This can lead to unexpected tax bills, especially if those distributions include short-term gains.

But there are strategies to mitigate this tax impact. Consider switching to index funds, known for their tax efficiency, or opting for actively managed funds within a tax-advantaged account like an IRA.