Taylor Larimore wrote:
Huh? A 94% tax rate for the five year period. I'm glad I am not in that bracket anymore.
How would you like to invest $50,000 in a mutual fund, never sell a single share, then seven weeks later receive a federal tax-bill of almost $9,000 for short-term gains? Mutual Fund Tax Bombs
Taylor, in the link you provided there was a $22k STCG pay out and a tax bill for $9k for a tax rate of 39.6% some seven weeks later. If DR X had then sold his fund the day after the payout he would have incurred a $22k short term loss because the NAV of the stock would be reduced by the payout and his net loss would be zero and he would owe zero tax.
And no I would not like the circumstances that Dr X incurred. But his investment was not the Pimco fund and the tax penalty you sighted in your original post is 94% not 39%. Something is wrong with the data.
Taylor wrote:PIXAX plunged -43.92% in 2008. That's also weird if it's a bond fund.
It's not a bond fund. It's a large blend equity fund that uses derivatives to try to obtain the risk exposure of the underlying eRAFI index.
The premise is that the eRAFI, which adds a couple of extra earnings quality adjustments to its weighting methodology, should be a better choice than the original RAFI 1000 or more conventional market-cap-weighted stock indexes such as the S&P 500. Meanwhile, by using swaps to get market exposure to the eRAFI (which require only a minimal collateral commitment), the fund is also able to invest most of its assets in a bond portfolio similar to that of PIMCO Total Return.
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If you look at a growth chart for PIXAX it did have a severe plunge in '08 as did the S&P 500. PIXAX had even a more severe drop but it more than made up for that larger drop in the ensuing years.
Taylor, I agree with your premise that tax efficiency is important but you examples are inappropriate. M*'s tax analysis is based on the maximum tax rate
at the time of the distribution which is not applicable to 98% of the population
as our politicians have some frequently brought to our attention over the past few months.
A scientist looks for THE answer to a problem, an engineer looks for AN answer. Investing is not a science.