If you had access to a pool of Mutual Funds could you switch back and forth to take advantage of dividend dist

Question

ributions of the holdings of those Mutual Funds? How would you know which fund to be in when? They give you the top ten holdings. How soon after a company distributes dividends to a Mutual Fund, does that Mutual Fund distribute them to you in shares?

Answer 1

First, you have the right to ask about the holdings on your fund at any given time. If they refuse to provide you with this information, consider if the fund is right for YOU. However, because funds do buy/sell often, it's not reasonable to have them update you on the exact holdings, at all times.

When a mutual fund receives a dividend from a holding, they distribute the dividend to fund holders typically within a month. I don't, off-hand, know the legally-required timeframe.

How you get dividends depends on how your account is setup. You may have it setup so that you receive a check. Or, it may be setup so that it sits in a money market or other "savings" type account. Or, dividends may be reinvested. Typically, unless you checked "reinvest dividends," the money will just sit in a low-interest account until you do something with it.

For long term investing, automatic reinvestment is a good idea because you don't need to worry about it. You will want to check you account every once-in-awhile to determine if you're still "balanced" correctly.

To answer your original question, it's not easy to jump between funds to take advantage of dividends. The amount of effort it would take an amateur without significant funds ($1M, maybe) just isn't going to be worth it. If your investment is a few hundred thousand or less, pick a good set of funds that represent your goals and stick with them.

You should also be aware of how taxes work with funds. You may recognize dividends each year, but you will not recognize gains (or losses) until you sell. Therefore, jumping between funds can have a real effect on the taxes you pay.

Answer 2

Funds do NOT typically distribute dividends they receive within a month. Most do it once a year in December (along with capital gains). Some also do it in March and others in June besides also in December. As soon as they do it, the price goes down so your trying to switch back and forth will NOT give you any advantage. You will be at a disadvantage of having to pay taxes on those dividends and capital gains you did not "earn" in the first place. If you do it enough, the funds will not allow you to invest with them anymore.

Answer 3

The mutual fund pays the dividends every 3 months.

But as the fund receives dividends from the different companies, the fund value increases because of the dividend..When the fund pays the divedends out, the fund value immediately drops by the amount paid out in dividends.

So hopping back and forth does no good at all