>>Regardless it is still a tax, and remember above you are not ever removing money from the fund.
Same is true of a savings account, at least back when they actually paid interest - wether you take it or not, you earned it - if you want tax-free growth use a retirement account.
Mutual funds incur capital gains because they are constantly buying and selling (and paying dividends) which are all taxable events, just because you didn’t spend the money, doesn’t mean you didn’t earn it.
The difference is Mutual funds distribute those gains. Unlike holding an individual equity long term.
It appears you missed my point. Passbook savings accounts are readily available cash on hand. They were never designed to be necessarily a means for retirement, but a way to earn interest on money you needed access to.