DQOTD2: Mutual Funds w/o Dividends/Interest/STCG?

[Midpack]

Acknowledged first world problem. Once Soc Sec & RMDs kick in over the next few years we will be generating more in equity dividends/STCG and bond/sweep act interest in taxable than we want/need. I would like to redeploy some of our holdings into something with decent (capital) appreciation but little or no dividend/interest - so I can take gains when/if we want to. The only thing I can think of is individual equities that don't pay dividends (e.g. Tesla) but I'd like something more predictable (positive) - and I really don't want to own individual equities any more. I already own Vanguard Tax-Managed Capital Appreciation Fund Admiral Shares - but that throws off more in dividends than I'd like.

 

[audreyh1]

Broad equity index funds tend to be quite low in terms of overall distributions, and the Vanguard equity index funds are the lowest. S&P500 index probably the lowest.

It’s really hard to find an active equity fund that doesn’t pay out quite a bit more at least in cap gains distributions.

Individual growth stocks? Geez, that’s a whole nother ball game.

Except Berkshire Hathaway which is famous for not paying a dividend. Who knows what their future will be.

 

[ERD50]

I use Berkshire Hathaway for this. It's reasonably diversified, so I feel comfortable going somewhat over the 5% in any one 'stock' rule of thumb.

Other than that, look at some of the small cap ETFs. some of those have low-ish divs (1.x %?)

-ERD50

 

[Gotadimple]

A broad market Index fund - not a mutual fund - generally pays dividends, not interest. Dividends, like capital gains, get special tax treatment. Expense ratios are also lower than mutual funds - unless it's a specialty index.

Pick from the offerings from your broker's no transaction fee index funds. I have pretty much substituted Index funds for my asset allocation both in stocks and bonds.

 

[OldShooter]

Well, for distributions from tIRAs the timing of paying the taxes, now or later, doesn't matter unless you expect your future marginal rate to be lower. So your problem reduces to taxes on the total return on those distribution amounts after they hit your taxable accounts. If you hate that, just give the return to charities that you like. Problem solved.

 

[Midpack]

Well, for distributions from tIRAs the timing of paying the taxes, now or later, doesn't matter unless you expect your future marginal rate to be lower. So your problem reduces to taxes on the total return on those distribution amounts after they hit your taxable accounts. If you hate that, just give the return to charities that you like. Problem solved.

If you read the OP you'll notice I was asking re: our holdings in taxable accounts, not IRAs...

 

[OldShooter]

If you read the OP you'll notice I was asking re: our holdings in taxable accounts, not IRAs...

Sorry. Read too quickly.

 

[pb4uski]

Acknowledged first world problem. Once Soc Sec & RMDs kick in over the next few years we will be generating more in equity dividends/STCG and bond/sweep act interest in taxable than we want/need. I would like to redeploy some of our holdings into something with decent (capital) appreciation but little or no dividend/interest - so I can take gains when/if we want to. The only thing I can think of is individual equities that don't pay dividends (e.g. Tesla) but I'd like something more predictable (positive) - and I really don't want to own individual equities any more. I already own Vanguard Tax-Managed Capital Appreciation Fund Admiral Shares - but that throws off more in dividends than I'd like.

Perhaps MYGAs? You can usually take out up to 10% annually and withdrawals are income first and then principal. Or zero or low coupon bonds? Or Berkshire Hathaway, effectively a managed domestic equity ETF that pays no dividends.

Or muni bonds... throw off non-taxable interest.

 

[audreyh1]

Perhaps MYGAs? You can usually take out up to 10% annually and withdrawals are income first and then principal. Or zero or low coupon bonds? Or Berkshire Hathaway, effectively a managed domestic equity ETF that pays no dividends.

Or muni bonds... throw off non-taxable interest.

Unfortunately non-taxable muni bond interest counts back into MAGI when dealing with IRMAA levels and I’m pretty sure Midpack has to deal with IRMAA thresholds.

 

[audreyh1]

A broad market Index fund - not a mutual fund - generally pays dividends, not interest. Dividends, like capital gains, get special tax treatment. Expense ratios are also lower than mutual funds - unless it's a specialty index.

Pick from the offerings from your broker's no transaction fee index funds. I have pretty much substituted Index funds for my asset allocation both in stocks and bonds.

Same for Vanguard index mutual funds - no different tax-wise than their equivalent ETF.

 

[pb4uski]

Unfortunately non-taxable muni bond interest counts back into MAGI when dealing with IRMAA levels and I’m pretty sure Midpack has to deal with IRMAA thresholds.

But he didn't say anything about IRMAA in the OP or any subsequent posts. I'm not a fricken mind reader you know!

 

[audreyh1]

But he didn't say anything about IRMAA in the OP or any subsequent posts. I'm not a fricken mind reader you know!

Well he didn’t. But Midpack was a participant on the recent thread on 2025 IRMAA levels. So I assumed that was part of his excess taxable income challenge.

 

[pb4uski]

Well he didn’t. But Midpack was a participant on the recent thread on 2025 IRMAA levels. So I assumed that was part of his excess taxable income challenge.

I got an idea... I'll issue him stock certificates in exchange for cash... then when he wants out I'll pay him pennies on the dollar... his excess taxable income challenge will evaporate into thin air!

 

[Phroig]

How about VIGAX? That's Vanguard Growth Index Fund, distributes around 0.5%.

 

[MichaelB]

Acknowledged first world problem. Once Soc Sec & RMDs kick in over the next few years we will be generating more in equity dividends/STCG and bond/sweep act interest in taxable than we want/need. I would like to redeploy some of our holdings into something with decent (capital) appreciation but little or no dividend/interest - so I can take gains when/if we want to. The only thing I can think of is individual equities that don't pay dividends (e.g. Tesla) but I'd like something more predictable (positive) - and I really don't want to own individual equities any more. I already own Vanguard Tax-Managed Capital Appreciation Fund Admiral Shares - but that throws off more in dividends than I'd like.

With an individual stock or concentrated eft/fund you may be taking on volatility and performance risk that isn’t worth the tax savings.

 

[audreyh1]

How about VIGAX? That's Vanguard Growth Index Fund, distributes around 0.5%.

That’s true - a growth oriented index fund will generally have lower dividends. Good one.

 

[gcgang]

…Berkshire Hathaway which is famous for not paying a dividend

We already have a winner!

 

[Midpack]

Unfortunately non-taxable muni bond interest counts back into MAGI when dealing with IRMAA levels and I’m pretty sure Midpack has to deal with IRMAA thresholds.

But he didn't say anything about IRMAA in the OP or any subsequent posts.

Sorry. I’ve been doing Roth conversions to the top of the 22% bracket so IRMAA is an issue for us for a couple more years.