MUTUAL FUND GAINS
Everybody’s Uncle,
I am at best a novice investor, and after seeing what the "experts" have been picking in the Stock Market, I have elected to do my own investing. My question is...I have read the best time to invest in Mutual Funds is AFTER the Capital Gains are paid to avoid paying taxes for the entire year. Is this true? I'm sitting on the sidelines now because most capital gains are paid out between October and December. Your answer may not make me rich....but it may stop me from being poor!
Thanx in advance,
John Kozak
John,
I am happy to share some information with you.
Mutual funds do not usually distribute capital gains - rather collect them into the fund's cash-on-hand for reinvestment. At the end of the year they issue a statement that shows net capital gains for the entire year. It makes no difference when you buy, nor do you pay "for the entire year." You pay once at the time you file your tax return.
If you liquidate (sell, in effect) shares of the fund - that capital gain occurs on the date of sale. Still, the capital gain is taxable at the end of the year in which it was sold. January or December makes no difference.
Many people buy fund shares monthly. The funds can trade shares of held companies an infinite number of times. Annual accounting keeps it simple (relatively).
Most mutual funds and internal trades follow these general rules.
If I have misunderstood your question or you do not understand the answer, feel free to ask for clarification.
Uncle Jim
