I receive letters occasionally from individuals who avoid investing because of the potential "tax issues."

Actually, you can make investing in stocks extremely tax friendly, if you follow these rules:

• If you don't sell, you don't pay. The beauty of investing in individual stocks is that you control your tax destiny. You incur a capital-gains tax liability only when you decide to sell the stock. This is very different than a mutual fund investor, who has no say over the capital-gains tax liability.
• Focus on low-dividend or no-dividend stocks. Yes, you do pay taxes on dividends, even though you may reinvest them. However, there is a way you can control dividends. Indeed, there are many quality stocks that pay little or nothing in the way of dividends. Now don't get me wrong - I'm not saying that avoiding dividends is a good investment strategy. In fact, one could argue that dividends, reinvested over time, can add measurably to a portfolio's total return. Still, if you are worried about taxes, avoiding high dividend-paying stocks is one way to go.
• Use IRAs when available. Investing in an IRA eliminates the tax hassle altogether. Indeed, funds in an IRA grow tax deferred. And, if the money is in a Roth IRA, the funds are withdrawn tax free.

Bottom line: You should never let taxes be an excuse for not investing in individual stocks.