What does extremely high capital gains tell you about a mutual fund.?
July 28th, 2010
I have been with a stock mutual fund for 20 years and for the last 3 years capital gains are increasing to the point where this year they reflected a third of the total value of the fund. This is killing me in terms of tax penalties and liabilities. Why would this happen and what does this tell you aboutr the fund?
My Related Websites
- Should You Invest in Mutual Funds? | welcome to technologyhome1.com
- China is the world's fourth-largest tanks seller | Global Military
- Decatur Metro » Six Decatur Properties Received Inaccurate Tax …
- Media Outrage » Blog Archive » Woman Sentenced To 3 Years In …
- The Real Liabilities of Orange County « Business Casual Blog
- Roth IRA taxation of gold or silver ETF capital gains? | Gold …
- Royal Gold Agrees to Acquire 25% Gold Stream on the Mt. Milligan …
- The UK Capital Gains Tax And Public Opinion | Gov Monitor
- Taxpayers Union says ObamaCare tax penalty unconstitutional …
- Sell Stock Images: Strange Ways to Make Money – Saving Advice
- DDDA report shows massive financial liabilities | Newstalk …
- Why Cap-and-Trade Is Politically Failing: Cost, Cost, Cost (The …
- Managing Liabilities From Pome By Gautam Koppala
- Tax Planning With Mutual Fund Investments | Internet 9 Blog's
- Tax Help – If You Procrastinate on Filing Your Taxes and Owe the …
- Milan driver gets 3 years in slammer for 10th DUI | Alaska DUI …
- Mutual Funds: Top 5 JP Morgan Funds | Daily Markets
- Mutual Funds: Top 5 Growth Funds | Daily Markets
- Hot Stock News For Wednesday 28 July: Citigroup, Bank Of America …
- Hot Stock News For Tuesday 27 July: BP, Wal-Mart, Yahoo, Google …
Mail this post
Posted in Top Rated Mutual Funds | 
Tags: 3 years, capital gains, liabilities, mutual fund, stock, tax penalties, total value
Ha ha. It is enjoyable to hear someone complaining because he is making money. Most people complain when they are not.
It is one of the drawbacks of investing in mutual funds that they are required to distribute all realized gains. That is the U S governments way of putting it to investors. Some mutual funds use strategies to minimize realized gains. Others do not.
One of your options would be to pick mutual funds that attempt to minimize the realized gains. Another option would be to invest in index funds which by their definition do not have much in the way of realized gains because they seldom trade their holdings. A popular technique among investors is to sell off enough of your loosing investments by year end to offset your gains if you happen to be so unfortunate.
What does it tell me about the fund? Tells me that the fund is doing well. Certainly better than than those that invested in CDOs.
your makion’ money.
Consult a professional regarding how much much tax you pay
It tells me, as a general rule, the manager is a "long term" holder of securities. At this point they are protecting their profits, which means selling the long term holdings and thus generating the capital gains.
I’m pretty impressed. At least they’re not blindly holding on to old positions… simply because they worked in the past.
> Why would this happen
Mutual funds are designed to pass the capital gains to the owners in order to get a favorable tax treatment.
>what does this tell you aboutr the fund?
This is problematic. If you invested in the same fund and this didn’t happen before, then it means many possible situations: (a) the recent fund manager is talented, (b) the recent fund manager is gambling with the funds (i.e. taking risky best) and got lucky, and/or (c) the recent fund manager is not sticking to the investment goals of the mutual fund as outlined in the prospectus.
You need to find out why this is happening and you hope it is because of (a) because of a talented fund manager. Now, if it’s because of (b) or (c), you might want to consider if this fund is appropriate for your investment goal(s).