Embedded Capital Gains from Mutual Funds
Does anyone know of any specific mutual funds that have had large embedded capital gains in any recent years?
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.Really?
Do any ever have "large" capital gains?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?[/quote] I don't know Gad man.[quote=snaggletooth]Does anyone know of any specific mutual funds that have had large embedded capital gains in any recent years?
I guess “large” is subjective. I would bet any wholesaler you speak with will gleefully tell you about their LOL.
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.
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.2009 was not a problem. But MOVING FORWARD, do want to control your 1099 or not mr client?
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.
[quote=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.
[/quote] 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.[quote=B24][quote=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.
[/quote] 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.[/quote] Yeh, but your taxable advisory accounts are models aren't they??[quote=noggin] [quote=B24][quote=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.
<P =“inside-copy”>-Fidelity International Small Cap [COLOR=#00529b">(FISMX)[/COLOR">: $3.96 a share, or 13.6% of the fund’s price before the distribution.
<P =“inside-copy”>-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.
<P =“inside-copy”>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. [/quote]
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.[/quote]
Yeh, but your taxable advisory accounts are models aren’t they??[/quote]
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.
Ditto
My mistake, I thought you were compelled to use models at Jones.
That's OK. Many that leave the Mothership make mistakes....My mistake, I thought you were compelled to use models at Jones.
That wasn’t the mistake…
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.
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...................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.
[quote=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.
[/quote] Thanks for this post. That's a good point.[quote=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.
[/quote] Yeah, I think I posted this in some forum a little while ago, but that was a BIG problem back in the 2000-02 debacle when funds had purchased certain tech stocks at like $25 back in the mid 90's...the client buys into the fund at the peak of the market, when that stock is trading at like $185, and then that stock subsequently plummets back to like $50 in 2002. You're left with a $135 loss (on that stock), and a $25 capital gain.You are getting old. that was this thread geezer.
[quote=B24]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.[/quote][quote=Wet_Blanket]You are getting old. that was this thread geezer.
[quote=B24]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.[/quote] [/quote] Ahhhhhhh shat ap you little rugrat! Get outa my yard!!ice is right— an FA puts mfds in a taxable acct, hoping the client thinks the 1099 is due to the acct going up in value (many or most clients seem to think that). When the surprise happens, it is the FAs fault- NOT the mfd. In truth, there is really only one reason to do it besides laziness: commissions are better. Even at Jones you can do UITs and ETFs. UITs may rollover every 15 months, but at least the taxation only occurs if acct goes up. If down, get a tax loss-- as it should be. Auto annual rebalancing in a way too
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