should I try to time it so I don't buy too close to the distribution date? Would this make much of a difference? Is there anything else I should do or know about setting up an auto investment plan?
2007-04-14 10:22:23 · 4 answers · asked by Jason 2 in Business & Finance ➔ Investing
By setting up an automatic investment plan to buy mutual funds, you probably don't need to worry too much about the distribution date. In a taxable account, if you buy too close to the distribution you recieve a tax penalty without benefitting from the actual capital gain, so you will want to be careful...but it is generally not such a big deal that I would spend a lot of time structuring my investment plan around it. Instead, focus on creating a diversified portfolio of solid long-term funds with good track records.
Set up dividend re-invest features so that as you receive the NAV distribution, you reinvest the proceeds directly back into the fund at the lower NAV. Good Luck!
2007-04-14 16:29:46 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Q: What is the investment vehicle taxable or non-taxable?
(Taxable is Individual, JTWROS, JT, UGMA's, and Trust's)
(Non-taxable is Roth IRA, IRA, 401(K), 403(B), SEP, SARSEP, College Savings Plan ... or basically anything tax sheltered)
Taxable accounts you need to determine when the MF payes interest, dividends to shareholder. Bond funds pay interest monthly ... Balance funds usually pay interest monthly and some dividends quarterly ... Stock funds pay capital gains semi yearly to yearly. These interest, dividends, and capital gains are taxable (1099 Div/Int & 1099 B). It's not good to buy them before they're paid out and then pay taxes on them since you didn't really age the $$$ long enough to enjoy the interest/ dividends/ and capital gains.
You could also see when the fund makes bulk "Distributions" or bulk "Deposits" to maximize you get lowest price. Deposits are huge at begging and end of months when corporations auto deposit from payroll. Distributions are huge in December (Required Min. Distributions for IRA's ... which yes effect the mutual fund for all account holders)
Non-Taxable (sheltered) you could look at bulk distributions/deposits from the fund. This is minimal impact. After distributions is benifical to you (lower price) after deposit is bad 4 you (higher cost). Other wise, the tax shelter takes care of everything else.
2007-04-14 13:58:17 · answer #2 · answered by Giggly Giraffe 7 · 0⤊ 0⤋
The value you pay for the shares will not be of consequence, but it could have bad tax implications to buy just before the distribution.
If you have to buy quarterly, buy just after the distribution date.
2007-04-14 10:31:29 · answer #3 · answered by bob shark 7 · 0⤊ 0⤋
You can find EFT's or Mutual funds that pay their capital gains on a monthly basis so you do not have to worry about this.
If you are doing quarterly, then you should not have to worry too much.
2007-04-14 15:30:36 · answer #4 · answered by NYC_Since_the_90s 6 · 0⤊ 0⤋