Vanguard Releases Preliminary Capital Gains Estimates

[justin]

I know a lot of folks here use Vanguard, so FYI:

http://tinyurl.com/u9p53

International value fund - about 8% capital gains distribution!!! Good thing I put that in a tax deferred account...

 

[JohnEyles]

A stupid question probably - but do you pro-rate these amounts for shares
you only owned for part of the year ?

 

[JohnP]

John -

There is no pro-rating... if you own a share on the date of declaration/record, then you get the total distributions.

JohnP

 

[riskadverse]

John -

There is no pro-rating... if you own a share on the date of declaration/record, then you get the total distributions.

JohnP

Which means you should probably not be purchasing mutual funds in taxable accounts the last couple of months of the year.

 

[lswswein]

Which means you should probably not be purchasing mutual funds in taxable accounts the last couple of months of the year.

That's called buying the dividend and all Vanguard prospectii have bold warnings explaining it

-h

 

[FinanceDude]

Which means you should probably not be purchasing mutual funds in taxable accounts the last couple of months of the year.

Good words to live by.............

 

[Outtahere]

That's why I'm holding off until the first of the year to do anything.

 

[wabmester]

That's why I'm holding off until the first of the year to do anything.

And that's why we have a "January effect."

 

[BOBOT]

Don't mean to hijack, but I was looking at that yesterday & it bugged me that you had to ferret out each of your funds from the whole list. Why can't they show you what's up with the funds you hold on your overview page? Seems a simple thing to do. Or am I missing something?

 

[JohnEyles]

Which means you should probably not be purchasing mutual funds in taxable accounts the last couple of months of the year.

Let's me get this straight ...

The naive would say it's a GOOD thing to buy right before the dividend (or sell
right after the dividend), because you're getting something for nothing. The
rub is, the share price drops by the amount of the dividend, right ? BUT, do
ordinary dividends AND capital-gains distributions BOTH work like this ?
Do individual stocks work the same ?

Maybe I oughta go sell the big dollop of Wellesley I just bought in my new
Vanguard account ? Of course, any price fluctuations could easily wipe
that out, but it's 50/50 I guess, except for the "January effect". Does
Vanguard get on your case if you trade a fund too much - notwithstanding
the ones with explicitly-stated limitations such as contingent deferred sales
charges and the like ?

 

[Nords]

The naive would say it's a GOOD thing to buy right before the dividend (or sell right after the dividend), because you're getting something for nothing. The rub is, the share price drops by the amount of the dividend, right ? BUT, do ordinary dividends AND capital-gains distributions BOTH work like this ? Do individual stocks work the same ?

The problem with the "something for nothing" perception is that while you're getting a "free" dividend or cap gains distribution, you're also paying taxes on it. You handed the mutual-fund company $1000, they handed $100 of it right back to you, and then they ratted you out sent a 1099 to the IRS proclaiming your obligation to pay at least $15 of your $100 in taxes. It would've been much easier to just leave $1000 in the account, no?

In mutual funds the share price drops by the amount of the dividend. That dividend is either sent to you (as a check) or reinvested (in more shares). Either way there's still the same total amount of money.

Ordinary dividends & cap-gains distributions work the same for mutual funds, although they're taxed at different rates. It's also the same situation for stocks, although there's no requirement to drop the stock price by the amount of the dividend... that trades on a less-regulated market and is affected by the perceptions of what it's worth. NAVs of mutual funds are more tightly regulated.

Maybe I oughta go sell the big dollop of Wellesley I just bought in my new Vanguard account ? Of course, any price fluctuations could easily wipe
that out, but it's 50/50 I guess, except for the "January effect". Does Vanguard get on your case if you trade a fund too much - notwithstanding the ones with explicitly-stated limitations such as contingent deferred sales charges and the like ?

Sure, but why miss out on the "January effect" (or some other seasonality issue) or some random event (up or down) or churn your portfolio to pay taxes?

Everyone gets on your case if you trade their mutual funds too much, and especially Vanguard. But if you're a small account and you're doing it over the Internet, which doesn't cost them much effort, then it's probably more expensive for them to do something about it than to ignore it.

 

[bongo2]

Do they estimate the dividend also, or is last quarter's dividend a good estimate?

 

[riskadverse]

Everyone gets on your case if you trade their mutual funds too much, and especially Vanguard. But if you're a small account and you're doing it over the Internet, which doesn't cost them much effort, then it's probably more expensive for them to do something about it than to ignore it.

Vanguard will stop you immediately or charge you a percentage of the transaction for frequent trading - no matter what size the transaction was, or how the order was placed. This was not always true, but has been for several years.