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Strategies |
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Think Before You Sell
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There are several reasons your capital gain distributions — and your tax
bill — could rise, even if you don't sell your fund shares:
- Your equity fund's portfolio manager sells
securities that have significantly appreciated in value, resulting in a large capital gain distribution.
- Your fund has a high portfolio
turnover rate, which may increase the fund's capital gain distribution1.
- Other fund investors redeem their shares, forcing the portfolio manager to sell securities — which
could trigger a taxable event for you — so these investors can "cash out" of the fund.
If your capital gain distributions go up, perhaps you should think twice before you redeem any of your shares to pay your tax bill. Why? Because you may incur short- or long-term capital gains by selling shares,
which could increase your tax burden even more.
1. Portfolio turnover rates
are subject to change and do not, by themselves, automatically result
in high or low distribution levels.
This information is general
in nature and is not intended to constitute tax advice. Please consult
your tax advisor for more detailed information on tax issues and
for advice on your specific situation.
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