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How tax efficient?
Old 01-01-2007, 10:07 AM   #1
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How tax efficient?

Iíve read that many funds were going to pay out large capital gains distributions this year. Now that the results are in, how tax efficient were your funds?

For me, overall ST & LT capital gains distributions were 0.8% of the ending balance of the taxable portfolio - which was higher than I thought it would/should be considering the composition of my portfolio. Looking at the details, though, I noticed that my index funds paid 0.00% capital gains. The non-index funds, therefore, generated ~100% of my taxable gains distributions. My big offender was Vanguard International Explorer, which paid out 7% of its year-end value as a taxable distribution - Ouch! Now it's hard to complain about Explorer's performance, but Vanguard's REIT Index performed even better but only paid out 0.5% in capital gains.


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Re: How tax efficient?
Old 01-01-2007, 11:01 AM   #2
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Re: How tax efficient?

Quote:
Originally Posted by 3 Yrs to Go
Now it's hard to complain about Explorer's performance, but Vanguard's REIT Index performed even better but only paid out 0.5% in capital gains.
Didn't the REIT kick out a few dividends? That could be more of a tax bill than the cap gains distributions.

Our least efficient fund, Tweedy, Browne Global Value (TBGVX), kicked out about 1.4% in dividends and another 1.1% in long-term cap gains. Their turnover is usually below 20% and we'll get some of that back in foreign tax credits.

Our most tax-efficient investment, Berkshire Hathaway, didn't kick out any dividends or cap gains. But I bet they file another six-foot tax return.
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Re: How tax efficient?
Old 01-01-2007, 11:23 AM   #3
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Re: How tax efficient?

Quote:
Originally Posted by Nords
Didn't the REIT kick out a few dividends? That could be more of a tax bill than the cap gains distributions.
Didn't really intend to compare the merits of the REIT Index vs. Explorer - more of an example of the wide differences in capital distributions for similarly performing funds.

But comparing all taxable distributions, REIT (which shouldn't be considered a tax-friendly investment given its high yield) still did a lot better than Explorer in the tax efficiency category. In 2006 REIT distributed 5.24% of its beginning NAV whereas Explorer distributed 12.1%.
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Re: How tax efficient?
Old 01-01-2007, 11:23 AM   #4
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Re: How tax efficient?

MFs in my after tax portfolio kicked out about 4% (div & cg) ...
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