A mutual fund is not a tax shelter, although some mutual funds can be held within tax-advantaged accounts like IRAs or 401(k)s. A tax shelter is a broader financial arrangement or strategy used to minimize or defer tax liabilities — often through deductions, credits, or specific investment structures. Mutual funds, on their own, do not automatically provide tax benefits. In fact, depending on how they’re managed, mutual funds can generate capital gains distributions that are taxable to investors even if they didn’t sell any shares. This is why investors sometimes seek out tax-efficient mutual funds or hold them in retirement accounts to avoid annual tax consequences. Calling a mutual fund a tax shelter can lead to misunderstandings about how investment income is treated. It’s better to think of the mutual fund as an investment vehicle, while tax strategy depends on how and where it is held.