Another downside of active funds : Distributions!

[adrift]

Don't ETF's have distributions as well?

For example, I looked up the ETF VTI and the similar MF VTSMX. At Vanguard, they both list similar quarterly distributions (dividends).

What am I missing?

Distributions consist of dividends and capital gains. You'll get dividends from both mutual funds and ETFs.

This article ETFs: Tax-Efficient, Not Tax-Exempt from Morningstar today has an analysis of ETF capital gains tax efficiency.

 

[haha]

Given these issues, why does anyone ever buy an equity fund?

Ha

 

[mathjak107]

For one thing because etf's can be sold short , funds have less volatility . for another reason it may not be such a good thing to put off 30 or 40 years of pent up taxes . like tax loss harvesting , deferring taxes down the road when you may get pushed in to a higher tax bracket wouldn't work out well .

i know as i got closer to retiring my fund mix changed . had i not paid what i did in taxes all along the decades the changeover would have had to be done in bits and pieces . i would have slammed in to 2008 instead of completing everything in just 2007 with not a lot of tax pain nor heavy losses by having to delay ..

also you may qualify for zero capital gains taxes earlier on .

most folks have or should have their equity's in a deferred account where the growth can do some real good being deferred vs bonds or cash at these low levels . even as little as a 2% dividend in a taxable account over decades offsets and wipes out any tax advantage and yes etf's get dividends . .

my managed funds out performed their index's by a lot and those were not available as etf's .

so yep , there are lots of reasons to buy funds . letting the tax tail wag the dog is never a good way to plan things ...

 

[NW-Bound]

My unrealized gains as I said below. (though I understand the confusion)

The fund is T. Rowe Price Small Cap Value - PRSVX

I look out of curiosity. On Friday 12/11, it was at $44.38/share, before distributing $8.19/share. That's 18.5%.

I don't think I ever had an MF distribution that large. When I still had earned income, the extra tax hit would hurt like crazy and got me bent out of shape.

Now that I am retired and fairly diversified, I would be able to accommodate such cap gain and dividend without much trouble. I would only have to do a smaller Roth conversion.

 

[bingybear]

I look out of curiosity. On Friday 12/11, it was at $44.38/share, before distributing $8.19/share. That's 18.5%.

I don't think I ever had an MF distribution that large. When I still had earned income, the extra tax hit would hurt like crazy and got me bent out of shape.

Now that I am retired and fairly diversified, I would be able to accommodate such cap gain and dividend without much trouble. I would only have to do a smaller Roth conversion.

In 2007 my MF distributions alone would have put me above the 15% bracket. So I tend not to use MF in taxable accounts. Like you, I can take a bit of a distribution and just shift roth conversions, but I could not take 20% -25% - or more distribution from all my taxable investments.
Presently with tax loss harvesting, I can offset LTCG distributions. STCG just act like income, so stuck with those.