Embedded Capital Gains from Mutual Funds

or Register to post new content in the forum

24 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Jan 19, 2010 4:51 pm

Does anyone know of any specific mutual funds that have had large embedded capital gains in any recent years? 

Jan 19, 2010 6:45 pm
BioFreeze:

Really? 

 
Yes, really!  I want it on hand when I talk about certain tax-conscious investments...just as evidence that it happens...there is a purpose here!  I just want the fund names.
 
 
Jan 19, 2010 6:47 pm
snaggletooth:

Does anyone know of any specific mutual funds that have had large embedded capital gains in any recent years? 

 
Do any ever have "large" capital gains?
Jan 19, 2010 6:48 pm
Gaddock:
snaggletooth:

Does anyone know of any specific mutual funds that have had large embedded capital gains in any recent years? 

 
Do any ever have "large" capital gains?
 
I don't know Gad man. 
Jan 19, 2010 7:27 pm

I guess "large" is subjective. I would bet any wholesaler you speak with will gleefully tell you about their LOL.

 
 
Jan 22, 2010 3:00 pm

just tell 'em how it works: you buy the mfd today and tomorrow they sell a stock they bought in 1961, you get your share of all that gain. Especially as the fund is sinking like in 2008, how do you feel about that? Do you like "surprise" 1099s as your fund sinks in value? Right- so let's talk about non-mfd options in your JTWROS. Move on.

Jan 22, 2010 3:06 pm

OK, as of right now, how many MFDs are distributing gains in 2009?

 
I think that was a much bigger problem during the tech wreck when a stock was purchased by a fund at $10 (in 1996), you bought the fund when that particular stock was at $180 (2000), and then they sold the stock when it came down to $30 (2001/2002).  You lost $150 (on that stock) and had a cap gain of $20.  2002 was pretty sh!tty in that respect.
Jan 22, 2010 3:15 pm

2009 was not a problem. But MOVING FORWARD, do want to control your 1099 or not mr client?

Jan 22, 2010 3:47 pm

USA Today 1-7-08:

 
-American Funds Growth Fund of America (AGTHX): $2.057 a share, or 5.7% of the fund's share price before the distribution.

-Fidelity International Small Cap (FISMX): $3.96 a share, or 13.6% of the fund's price before the distribution.


-American Century Real Estate (REACX): $1.94 a share, or 7% of the fund's price before the distribution. The fund also paid $2.05 a share in short-term gains, which are taxed at your regular income tax rate.


Vanguard 500 Index (VFINX), the third-largest stock fund, paid no capital gains distribution — and it hasn't since 2000. If you're investing in a taxable account, consider an index fund, or one whose investment policy is geared toward minimizing distributions.

Jan 22, 2010 4:14 pm
newnew:

USA Today 1-7-08:

 
-American Funds Growth Fund of America (AGTHX): $2.057 a share, or 5.7% of the fund's share price before the distribution.

-Fidelity International Small Cap (FISMX): $3.96 a share, or 13.6% of the fund's price before the distribution.


-American Century Real Estate (REACX): $1.94 a share, or 7% of the fund's price before the distribution. The fund also paid $2.05 a share in short-term gains, which are taxed at your regular income tax rate.


Vanguard 500 Index (VFINX), the third-largest stock fund, paid no capital gains distribution — and it hasn't since 2000. If you're investing in a taxable account, consider an index fund, or one whose investment policy is geared toward minimizing distributions.

 
OK, that was 2007.  AGTHX did 11.0%.  The S&P500 did 5.5%.  I will take 11% and give 15%(tax) of 5.7% of that gain back versus 5.5% with no taxes any day.
 
But your point is well taken, and I agree.  Index funds and ETF's are much more tax efficient.  That's what I have started doing in my taxable advisory accounts.
Jan 22, 2010 5:34 pm
B24:
newnew:

USA Today 1-7-08:

 
-American Funds Growth Fund of America (AGTHX): $2.057 a share, or 5.7% of the fund's share price before the distribution.

-Fidelity International Small Cap (FISMX): $3.96 a share, or 13.6% of the fund's price before the distribution.


-American Century Real Estate (REACX): $1.94 a share, or 7% of the fund's price before the distribution. The fund also paid $2.05 a share in short-term gains, which are taxed at your regular income tax rate.


Vanguard 500 Index (VFINX), the third-largest stock fund, paid no capital gains distribution — and it hasn't since 2000. If you're investing in a taxable account, consider an index fund, or one whose investment policy is geared toward minimizing distributions.

 
OK, that was 2007.  AGTHX did 11.0%.  The S&P500 did 5.5%.  I will take 11% and give 15%(tax) of 5.7% of that gain back versus 5.5% with no taxes any day.
 
But your point is well taken, and I agree.  Index funds and ETF's are much more tax efficient.  That's what I have started doing in my taxable advisory accounts.
Yeh, but your taxable advisory accounts are models aren't they??
Jan 23, 2010 9:03 am
noggin:
B24:
newnew:

USA Today 1-7-08:



-American Funds Growth Fund of America [COLOR=#00529b">(AGTHX)[/COLOR">: $2.057 a share, or 5.7% of the fund's share price before the distribution.

-Fidelity International Small Cap [COLOR=#00529b">(FISMX)[/COLOR">: $3.96 a share, or 13.6% of the fund's price before the distribution.



-American Century Real Estate [COLOR=#00529b">(REACX)[/COLOR">: $1.94 a share, or 7% of the fund's price before the distribution. The fund also paid $2.05 a share in short-term gains, which are taxed at your regular income tax rate.



Vanguard 500 Index [COLOR=#00529b">(VFINX)[/COLOR">, the third-largest stock fund, paid no capital gains distribution — and it hasn't since 2000. If you're investing in a taxable account, consider an index fund, or one whose investment policy is geared toward minimizing distributions.



OK, that was 2007. AGTHX did 11.0%. The S&P500 did 5.5%. I will take 11% and give 15%(tax) of 5.7% of that gain back versus 5.5% with no taxes any day.



But your point is well taken, and I agree. Index funds and ETF's are much more tax efficient. That's what I have started doing in my taxable advisory accounts.
Yeh, but your taxable advisory accounts are models aren't they??





Only if you use the models. I don't use the models, other than for small accounts in IRA's. For the few taxable accounts I have, I use a mix of index funds, ETF's, and tax-favorable funds. Most of my advisory accounts are IRA's. But generally, almost all my advisory accounts are custom.

Jan 23, 2010 9:57 pm

Ditto

Jan 23, 2010 10:54 pm

My mistake, I thought you were compelled to use models at Jones.

Jan 25, 2010 11:26 am
noggin:

My mistake, I thought you were compelled to use models at Jones.

 
That's OK.  Many that leave the Mothership make mistakes....
Jan 25, 2010 11:40 pm

That wasn't the mistake.....

Jan 28, 2010 11:30 am

This isn't exactly what you were asking, but helps illustrate the point.  A few years ago I was talking with my American Funds wholesaler (back when I was at EDJ and I actually saw him).  He told me that their cost basis on Altria in many funds was less than a buck a share.  That's part of the reason almost all of their funds have a big stake in Altria (or at least they did, to be honest I haven't really looked at this in a few years). 


Point being that if they sell Altria, it is almost 100% capital gains.  This is a tax problem, and is also an investment problem.  They know if they unload Altria they are going to create a tax problem for the fund, so they tend to hold it.   That particular stock worked out, but generally when the tax tail wags the investment dog usually bad choices are made.

Jan 28, 2010 1:32 pm

Yet another reason why I am more and more disallusioned with mutual funds by the day.  Mind you, I came to the retail side from the fund wholesale side.  So, to even think this is borderline hearsay.

Jan 28, 2010 1:47 pm
deekay:

Yet another reason why I am more and more disallusioned with mutual funds by the day.  Mind you, I came to the retail side from the fund wholesale side.  So, to even think this is borderline hearsay.



 
What you talking 'bout Willis?  With names like Putnam and Ja***, mutual funds are the best investment around...................
Jan 28, 2010 1:53 pm
EDJ4now:

This isn't exactly what you were asking, but helps illustrate the point.  A few years ago I was talking with my American Funds wholesaler (back when I was at EDJ and I actually saw him).  He told me that their cost basis on Altria in many funds was less than a buck a share.  That's part of the reason almost all of their funds have a big stake in Altria (or at least they did, to be honest I haven't really looked at this in a few years). 


Point being that if they sell Altria, it is almost 100% capital gains.  This is a tax problem, and is also an investment problem.  They know if they unload Altria they are going to create a tax problem for the fund, so they tend to hold it.   That particular stock worked out, but generally when the tax tail wags the investment dog usually bad choices are made.


 
Thanks for this post.  That's a good point.