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doughnuts

tip
edited November 2013 in Fund Discussions
I received a cap gain dist from my MERDX (Meridian growth fund) fund and I thought of this board and the question, Why did my fund price go down so much? I need to understand this better. I've owned this fund for 20 yrs. The last three it's paid a lot of cap gains and I have to pay taxes on that. I'm thinking of going to an index fund to try to lessen the tax liability. Does that make sense? Index funds don't sell off stocks as much? Thanks tip

Comments

  • TheShadowTheShadow
    edited November 2013
    The Growth fund paid a Short-Term Capital Gain Per Share of $0.92390
    & Long-Term Capital Gain Per Share $12.30854 (ouch!).

    http://meridianfund.com/index.php?cID=237

    It may not continue to pay large distribution amounts in the future. Was there a manager change (?) or possibly the huge run up in the markets would have contributed to the large payout. The Vanguard S&P 500 has a large potential for distribution, but has not paid anything for some time.
  • msf
    edited November 2013
    The former Janus Triton and Venture management team (Chad Meade/Brian Schaub) took over the fund at the beginning of September. This may be a good thing, but in the short term, it looks like they're cleaning house.

    Scanning the annual statement (June 30th), it looks like the largest holding then was Brown & Brown Inc. (insurance brokers), at 3.5% of the portfolio. Between then and the end of September (likely during September), that position was significantly cut back or eliminated - it doesn't appear in the top ten holdings on Sept. 30th.

    Affiliated Managers Group, Inc. (brokerage and money mgmt) had constituted had constituted 3.0% of the fund; it's not in the top ten (2%+) as of the end of September. Perrigo Co. (pharmaceuticals) was 2.8%; also fell from top ten. You get the idea.
  • AndyJ
    Tip, if you sell now and switch to an index fund, remember to factor in that you'll owe tax on all the cap gains you've racked up over the past 20 years.
  • ron
    wow, took you 20 years to find that out? Wait till your in a 10-15% tax bracket or if you are, there is no CG tax.
  • msf
    Reply to @AndyJ:

    It depends. On rare occasions, shares purchased 1-2 years ago have gained less than the projected distribution per share. From a tax perspective, it then makes sense to sell just those shares, taking care that the sale settles before the record date. You don't need to sell all your shares. You do need to use actual cost and specific share identification.

    You avoid the distribution, paying cap gains tax (if any) instead on your 1-2 year appreciation instead of the higher distribution (some of which might even be ordinary income). You can repurchase the shares the next day (ex-div).

    One might ask what happens to the dividends you don't get. The total dollars to be paid out by the fund are fixed (it's the total cap gains and income generated by the portfolio). If you sell your shares, then this total pot is divided among fewer shareholders, so each remaining shareholder gets a proportionately bigger distribution. In essence, you're dumping the tax liability of your distribution onto everyone else.
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