If you're looking to invest in mutual funds and avoid capital gains tax, Vanguard Tax Managed International Fund (VTMGX) and Third Avenue Value Fund (TAVFX) are recommended as funds to look into, along with index funds and ETFs (exchange traded funds) in general. [WSJ]
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Look at how much Third Avenue Value Fund has lost over the last year before you get into it to "save on taxes."
Third Avenue has lost BIG on financials (MBI, PMI, Radian, Ambac), and will only get worse.
It's one thing to not want to pay taxes, but to lose 50% of your portfolio to do so????
The article points this out, but this mainly refers to holding those funds in a taxable account. You wouldn't want to give up potentially higher gains by going for a more tax-efficient fund in an IRA or 401(k). In general, you should put your most tax inefficient investments in sheltered retirement accounts and your more tax efficient investments in taxable accounts (assuming you want to hold both longterm).