Why did I receive short term capital gains?

[gbstack]

My shares of FCPGX – Fidelity Small Cap Growth - distributed both short and long term capital gains on 9-10-2021. I've held these shares for several years. Why did I receive short term capital gains? I thought all shares over 1 year only paid long term capital gains.

 

[MRG]

You own the fund. The fund took a short term capital gain and that was passed on to you.

 

[gbstack]

Thanks for your help!!

 

[Sunset]

This is why we changed from Funds to ETF's for a lot of holdings, over a period of years.

Funds might buy and sell and generate capital gains both short and long term. ETF's do this much much less.
That way we now get less tax time surprises of declared capital gains.

 

[pb4uski]

Wow, that was quite a capital gain distribution!

Date	Per Share Amount	Reinvestment Price
9/10/21	$5.023	$34.23
12/18/20	$1.179	$34.06
9/11/20	$1.61	$26.94
12/20/19	$0.261	$27.40

 

[gbstack]

I was surprised with the amount. $2.36 was short term and $2.66 long term!

 

[MRG]

I was surprised with the amount. $2.36 was short term and $2.66 long term!

They generally save these up and distribute no less than once yearly.

 

[walkinwood]

I used to own an actively managed small-cap fund & sold it because of the wildly fluctuating cap gains distributions that made ACA planning impossible.



I moved that part of my portfolio to a small cap index fund and have had no cap gain distributions since. Total returns are about the same.

 

[jazz4cash]

Yeah I got anxious reading this but I have FECPX which is the index version so the distributions are modest. Now I’ll compare the two funds and hopefully reaffirm my section of the index version.

 

[bingybear]

If you are sitting in the chair when the MF distributes ... it is yours.

nothing personal. With MF you should keep track of embedded in MF you own or are considering.

 

[scrabbler1]

I used to own an actively managed small-cap fund & sold it because of the wildly fluctuating cap gains distributions that made ACA planning impossible.

I moved that part of my portfolio to a small cap index fund and have had no cap gain distributions since. Total returns are about the same.

I did the same thing at the end of 2019, but with large-cap funds (switching from an actively managed one to an index one). The lost ACA subsidies were growing, so it was time to get back on that train in 2020.

 

[NW-Bound]

My shares of FCPGX – Fidelity Small Cap Growth - distributed both short and long term capital gains on 9-10-2021. I've held these shares for several years. Why did I receive short term capital gains? I thought all shares over 1 year only paid long term capital gains.

By law, when an MF manager sells some of his holdings and realizes a gain or loss, he has to pass it on to his shareholders. They have to pay taxes on the gain, although they are not selling any MF share.

This "premature" tax will be recovered by the long-term shareholder eventually when he sells. The distribution reduces the price of the MF share, so his future gain will be less. Or if he reinvests the distribution, he's buying back into the MF with a lower basis.

Wow, that was quite a capital gain distribution!

Date	Per Share Amount	Reinvestment Price
9/10/21	$5.023	$34.23
12/18/20	$1.179	$34.06
9/11/20	$1.61	$26.94
12/20/19	$0.261	$27.40

Yes, that's huge. It shows institutional investors are booking some of the gains in their hot stocks. They are rotating out of some hot sectors.

PS. Or maybe not. FCPGX – Fidelity Small Cap Growth - is shown to have a portfolio turnover of 126%. It means on the average they hold a share for 10 months. These guys are traders, and perhaps you have to be to play in this volatile stock sector.