Thoughts and Riches

.....a blog about personal finance, motivational stories, deals, and special offers

Books
Web Domain Registration
Go Daddy $12.99 Turbo SSL Sale!
Banner
Get Started Now
Tuesday, October 24, 2006
Delaying taxes on mutual funds
With the Dow Jones average rallying past 12,000 points, many investors, who were previously talking about real estate prices, are now busy talking about stocks and mutual funds. I do not own any real estate investments and have always been interested in stocks and mutual funds, so it's finally good to see that stock market has been going up nicely recently.

I have been planning to buy mutual funds in a taxable account from the Dodge and Cox mutual fund family but because of laziness and lack of money, had been delaying it. Now, however, I have to delay buying it until late December or early January because in the last quarter of the year, most mutual funds make capital gain distributions.

By law, mutual funds have to distribute any capital gains (difference between sale price and purchase price) they make during the tax year to its shareholders and this distribution typically happens in Nov-Jan period. So if you purchase a mutual fund now, you may end up getting some capital gains distributions. This may not sound bad but the problem is that you end paying tax on it (typically as a short term gain if you held the fund for a short period of time only) to the IRS when filing your taxes. In addition, the capital gains directly reduce the Net Asset Value of your mutual fund as well as its share price. So it's always better to avoid buying mutual funds later in the year and wait until after they have made their capital gains distributions. Most fund family can let you know ahead of time when they plan to make distributions in their different mutual funds; this info can be obtained from their Web site or by contacting them.

For now, I will just buy some mutual funds in my IRA account because I don't have to worry about capital gains distributions since the taxes are deferred until later.
posted by Ruby @ 9:47 AM  
0 Comments:
Post a Comment
<< Home
 

See important Disclosure and Disclaimer

Favorite Quote
"If you look at what you have in life, you will always have more. If you look at what you do not have in life, you will never have enough".
                - Author Unknown
Disclosure
This site uses cookies from companies like Google and others to enable the companies to deliver their services, personalize their ads and product offerings, and for traffic analysis. Information about your use of this site is shared with these companies. By using this site, you agree to its use of cookies. Additionally, this site, including blog posts, may contain reviews, links, banners, text and other forms of advertisements for products, services, courses, and so forth of companies of which we may be an affiliate member or for which we may get paid for referrals. This site may also contain blog posts for which we are paid, as well as blog posts regarding products or services of companies from which we may have received complimentary products or services.
Reward Surveys/Panels/Shopping/Contests
Kellogg's Coupon Newsletter
Mint.com - Take Control of Your Money
Protect Your Computer Files
Upromise.com
Job Search site
Indeed Jobs
Yahoo! HotJobs - Job Postings
Monster
CareerBuilder
Credit Cards
Best Western Canada Credit Card - 20,000 rewards points: Apply Now!
Apply Now!
Insurance
Health: eHealthInsurance
Auto: www.21st.com
Travel
Phone Service
Investing
TheStreet.com 120x120 Best Seller Giveaway
Household
eFaucets.com
Babysitters
Nannies4hire.com
Find the perfect babysitter at Sittercity.com
Previous Posts
Archives
Favorite Charities
Disclaimers, Privacy Policy, and Disclosures
  • Disclaimer, Privacy Policy, and Disclosures

  • Third-Party Offer Disclaimer
  • Subscribe to Blog Posts
    Add to Google Reader or 

Homepage
    Bookmark this blog site
    Contact Me

    Email

    Web Site Link Exchange

    Link Exchange

    © Thoughts And Riches proudly powered by Blogger.