Halloween is the time of year to start thinking about the impact of capital gains distributions from your mutual funds and ETFs. At CapGainsValet.com, we’ve spent the last month updating our site and building our Free and Pro databases. We’ve already made two passes through over 250 fund firm websites looking for 2016 distribution estimates.
As I think about how this year compares to previous years, I have a house full of high schoolers dressed up for a Halloween party. Some of their costumes match my initial comments for the year:
- Einstein – Educate yourself. Misunderstanding the impact of capital gains distributions can cost hundreds or thousands of dollars in extra taxes. The Articles section of the CGV website has several short pieces that explain beginner distribution concepts as well as more advanced tax saving strategies.
- Wonder Woman – Heroic firms have already posted 2016 estimates. Investor friendly firms make their shareholders’ lives easier by posting capital gains information (estimated amounts and distribution dates) early. We’ve already found this information for nearly 90 firms. We will continue to cycle through mutual fund firms and post estimates as they become available.
- Chihuahua – Our doghouse will probably be smaller than usual. Our annual “In the Doghouse” list compiles funds with estimated distributions over 20% of NAV. At this time last season, we already found 28 funds with these huge distributions. This year, we have only eight. It’s early in the year so the list will continue to grow.
- Ostrich – Do not bury your head in the sand. While I’m expecting this to be a less dramatic season for capital gains distributions, ignoring them is not a good plan. We’ve already found over 60 funds that are expecting distributions in the 10-20% range and we’ve seen countless distributions in the 5-10% range. Planning around (even small) distributions still makes good sense.
If you are not aware, the MFO Discussion board has an impressive list of links of capital gains estimates. Between that posting and CapGainsValet, you should be able to get through the remainder of the year without any surprise scares.
Mark Wilson, APA, CFP®
Chief Valet, CapGainsValet