Mutual Fund Distributions
If you watch your mutual funds closely this time of year you might end up with a sinking feeling in your stomach. You might see your mutual funds share price drop precipitously. Last week I had one hit me with a 15% drop.
Why do mutual funds do this? The tax man makes them. The fund has to make distributions to account for the capital gains and dividend income it receives. As with most things governmental it is far from fair. If you buy a fund and it has a distribution the next day you get to pay the tax bill for the last year.
Before you buy a mutual fund check with the fund or your broker on when the distribution date is. If it is within the next month or two consider waiting until after the distribution to invest.
Of course if you do all of this in your tax deferred accounts it will not make a bit of difference.