This Christmas season, don't just mindlessly blow your hard-earned cash on consumer gimcrackery in a futile effort to produce a physical manifestation of the love you bear your family. Take some time for yourself, to sit down in a quiet spot and think about the important things . . . like tax arbitrage:
It's not a good idea to spend your hard-earned money for the privilege of paying taxes on someone else's earnings. That means you should be careful if you buy mutual funds in December.The tax law requires mutual funds to distribute capital gains on their stock sales annually, and most distribute the whole amount in December. If you buy into a mutual fund the day before the distribution, you buy a share of the whole year's liability.
Many funds put the amounts and dates expected capital gain distributions on their web site. It's worth a few minutes on the web to avoid buying a year's worth of mutual fund tax liability.
Note that this is rarely a problem with index funds . . . yet another point in favor of passive investment strategies.
I have always been weary of anything with the word "mutual" before or after it ever since my home was devastated by a fire years ago and my family had insurance from a mutual company.
At least in the insurance business, mutuals are inherently egalitarian, and thus don't take individual property (personal or real) equity into account beyond base home price, mortgage, and fixed income estimates.
By "rarely" I assume you mean "unless you own a Russell 2000 index fund, since its annual rebalance causes massive turnover and much higher cap gains distribution than other index funds".
I'm digging your problem with confirmation bias on this whole EMH issue.
By the way, points in favor of passive investing strategies in no way confirms the existence of the EMH. I 100% disagree that markets are efficient, I believe that the EMH is wrong in both strong and weak forms, and yet I totally believe that a passive investing strategy is optimal for most.
In buying an index fund, you still get the tax hit; it's just smaller. Not less frequent -- smaller.
I must say, a Mutual structure is financially antithetical to the ideal way a healthy corporation should function. Let us not forget that the structure of any mutual or co-op organization is based on tenets founded in part by Karl Marx's old buddy Ferdinand Lasalle. Now how can that be compatible with a free market?
Person: like they say dozens of times each day in my spam filter, size matters.