“Could you imagine taking your bonus? You're a big-time lawyer and you just got a big time year-end bonus, 200K, and you dump it in this mutual fund. You've had it for 11 seconds and they go, We're issuing a 25% capital gain distribution. And now you have a $50,000 capital gain distribution on a position you've owned for 11 seconds.”
sputnikintelligence.com
The hosts were explaining that taxable mutual funds pass capital gains to shareholders at year end, even to brand-new buyers. Joe Saul-Sehy had just called December a dangerous time to add money to such funds, and Josh Bannerman gives this example.
Yeah.
…time to be adding money into funds in your taxable brokerage account. Before you put money in a mutual fund in a taxable brokerage account, look and see what that capital gain is going to be before you do it. There isn't going to be one or it's going to be tiny. Well, then maybe you take it.
Could you imagine taking your bonus? You're a big-time lawyer and you just got a big time year-end bonus, 200K, and you dump it in this mutual fund. You've had it for 11 seconds and they go, We're issuing a 25% capital gain distribution. And now you have a $50,000 capital gain distribution on a position you've owned for 11 seconds. You're
selling off a bunch of
$7,500 in taxes on a position that you just bought five days ago.
Oh, and here's a bigger kick in the pants. Let's say you do that and you don't keep any liquid money, right? You don't have, you don't have any appreciable emergency fund. And so now you're coming from. Now you sell. And OG, let's say it's gone up during those few days.