Due to strong gains this year, particularly in foreign, small-cap and value funds, and the depletion of losses from the last bear market, some experts believe mutual funds’ taxable distributions will be the highest on record, The Wall Street Journal reports.
Last year, funds paid out $259 billion in capital gains distributions, the highest amount since 2000, and a number of large fund companies have announced that they expect their distributions to be higher this year. Those companies include Janus, American Funds, T. Rowe Price and OppenheimerFunds.
Because many funds make these distributions in November and December, financial planners are creating strategies for investors who want to put their money to work during those two months. RegentAtlantic Capital, for instance, is planning to recommend exchange-traded funds.
“I expect bigger distributions coming out of funds this year,” said Christopher Cordaro, chief investment officer at RegentAtlantic. “The longer you get into a bull market, the harder it is for funds to manage tax efficiently.”
According to Lipper, stock funds have lost an average of 1.4 percentage points a year to taxes.
Morningstar Analyst Christopher Davis calls funds with strong performance “tax time bombs.”
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.