For the mutual fund experts?

Question

This month a few funds in my portfolio lost a significant percentage of their value in just one day (for instance reacx). The reason supposedly was a cap gain or cap loss. Could anyone explain me, what that means? Are those gains or losses announced ahead of time, and would it be better to sell ahead of time?

Answer 1

This is not a "loss" for you. The federal gov't (by tax law) has the mutual fund industry separate the amount of gains from the NAV. Then money is then reinvested (usually) back into the fund (more shares). The net result;

No change in the value of your fund (from this event)
Taxes may be due on the gains.

Hoped this helps. Some people try to avoid buying funds in December for their taxable accounts. Selling the fund before "distribution" may help if you planned to draw it out soon anyway.

No material change at all in IRA's, 401K's, 403B's etc.

Best (general) advice;
Don't worry about it. Pay taxes if due. Keep on investing.

Answer 2

If you're statement said something about a cap gain it could have been that the fund processed a cap gain distribution. If that is the case the net asset value per share would have gone down but you would have received the distribution (amount depends on how many shares you have). Most funds have automatic reinvestment where they would automatically put your money from the distribution back into the fund thus giving you more shares and by not giving you the cash they save you from paying taxes on that gain/distribution. So it's possible that even though the value per share dropped you didn't lose any money because now you have more shares. Check your share amount carefully and you might be able to catch it depending on the size of the distribution. Also this is probable because most funds do distribute in December as a way to clear out any undistributed net income or cap gains in order to save money on taxes because the year end is December 31st on most. I'm sure there are other explanations for what you're seeing but this is what jumped at me when i first read your question because you mentioned the cap gain. Hopefully this is helpful...

Answer 3

it is troublesome! traditionally the way is to %. the funding companies and/or fund managers which have performed continually properly interior the previous. not so confident that is as elementary those days. before each and everything you want to go with the component to funding you want and then see what money are available and how properly they have performed interior the previous. i ought to imagine that fairness markets ought to do properly over the subsequent 2-3 years (or longer) and hence i ought to bypass for that. yet then if I were doing that i ought to bypass for a passive tracker fund which include an Index ETF. yet in a distinct thanks to do that is a depending product, and also you should attempt this your self.