Wait after dividends & capital gain distribution to invest?

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Wait after dividends & capital gain distribution to invest?

Postby jbyoun1990 » Wed Dec 26, 2012 9:56 am

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Last edited by jbyoun1990 on Wed Mar 20, 2013 8:25 pm, edited 1 time in total.
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Re: Wait after dividends & capital gain distribution to inve

Postby sscritic » Wed Dec 26, 2012 9:58 am

Not if the dividends are zero as well.
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Re: Wait after dividends & capital gain distribution to inve

Postby jbyoun1990 » Wed Dec 26, 2012 10:09 am

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Re: Wait after dividends & capital gain distribution to inve

Postby grabiner » Wed Dec 26, 2012 7:43 pm

jbyoun1990 wrote:I want to invest in this index fund BEFORE New Years.... but this fund seems to do their distribution every 6 months: 1 during june and one like 12/31. I just don't want to invest right before 12/31 and then pay anything unnecessary.


Check with the fund company for the "ex-dividend date", which is the day after the "record date" for a mutual fund. If you hold the fund on the record date, you receive the dividend. If you buy on the ex-dividend date or later, you do not have receive the dividend.

Most Vanguard funds have already gone ex-dividend, but there are a few with a record date of 12/27 and ex-dividend on 12/28: Vanguard Estimated 2012 Year-End Distributions

From your additional post, I see you are considering LifeStrategy Moderate Growth, which does have a record date of 12/27 and will distribute a capital gain (from its bond holdings). But even if you wait to buy until 12/28, it's not a good idea to hold a balanced fund in a taxable account, as you can't switch to a different allocation later without selling the original fund for a capital gain.

If you want to hold 60% stock in your taxable account, it makes more sense to buy separate stock and bond funds; you will then have little tax cost if you need to sell bonds to buy a different type of bonds, or to hold bonds in a different account, or to spend money from the bond portion of your account.
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Re: Wait after dividends & capital gain distribution to inve

Postby jbyoun1990 » Thu Dec 27, 2012 9:37 am

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Re: Wait after dividends & capital gain distribution to inve

Postby sscritic » Thu Dec 27, 2012 9:44 am

jbyoun1990 wrote:So what you are saying is that if my money is in the mutual fund before the "ex-dividend date", I will receive the dividend and also be taxed for whatever that amount, correct?

No, you get the dividend if you hold the stock on the record date.
If you hold the fund on the record date, you receive the dividend.

Owning the stock two months before the ex-dividend date doesn't mean you get the dividend. Perhaps I don't understand what you mean by "before."
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Re: Wait after dividends & capital gain distribution to inve

Postby grabiner » Thu Dec 27, 2012 9:55 pm

jbyoun1990 wrote:Also... (slightly off topic) it seems like everyone is telling me not to invest mutual fund other than a tax-advantage account such as an IRA.


My own advice was not to put the money in this mutual fund. If you need liquidity before retirement (for example, saving for a house down payment), you may need to have some money in a taxable account, but LifeStrategy Moderate Growth will cost you more in taxes than many alternative funds.

I mean, true some IRAs have less withdraw restriction but I haven't found one yet that is as easy as just a regular account. I'm no expert so prove me wrong because I'm always learning


If you have a Roth IRA, you can withdraw your contributions free of tax and penalty at any time, with just a few mouse clicks (with Vanguard, you can directly transfer the funds from your Roth IRA to your bank account or money-market fund); you pay tax (and sometimes a penalty) only on earnings if you withdraw them before age 59-1/2. Thus, if you put $5000 in a Roth IRA for 2012 and $5500 for 2013, you can withdraw $10,500 from the Roth IRA whenever you want, but if you don't withdraw it and the fund pays $500 in dividends next year, you will not owe any tax on that $500 either as long as you save it for retirement.
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