In the December issue, we explained How Fund Distributions Affect Fund Share Prices. In it, we made this point: "Before making a major purchase of shares in any mutual fund, check the fund’s website to see (1) if a distribution will be made soon, and (2) if there is an estimate of the amount. If you don’t find this information on the website, you can call the fund directly. If a distribution is scheduled soon, you have the option of waiting to purchase your shares the day after the distribution to avoid its tax impact."
Distributions cause taxable events in regular investing accounts. (If you invest only in tax-deferred accounts, you can ignore the discussions about fund distributions because they don't create tax liabilities in such accounts.) So, for taxable investing accounts, needlessly incurring taxable distributions (such as buying a new fund just prior to a distribution) is usually avoided. But not always.
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