When you invest in your retirement life, it’s paramount you harness the advantages of a tax-efficient investment strategy.
One strategy is to avoid surprise year-end capital gains distributions from mutual funds.
Year-end distributions are why I prefer having individual, dividend-paying stocks in a brokerage account rather than the uncertainty that comes with mutual funds around this time of year.
Take caution. Be prudent. Do not buy a fund around this time of year to immediately be on the hook for a tax gain.
It’s like showing up for dinner, after it’s been eaten, and being stuck with the bill.
Tom Herman writes at The Wall Street Journal:
Capital-gains distributions represent “a fund’s net gains, if any, from the sale of securities held in its portfolio,” the Investment Company Institute says in its latest Fact Book. During 2018, mutual funds distributed $511 billion in capital gains to shareholders, the ICI says. About 31% of that amount went to taxable household accounts. Most distributions typically occur in the fourth quarter, usually during November and December. For investments in taxable accounts, those distributions typically are taxable—even if the taxpayer made an investment in the fund shortly before the date to qualify for the payout.
Read more here.
E.J. Smith - Your Survival Guy
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