Mutual Funds vs ETFs

Investing
1

Doing taxes, I saw that the Capital Gains Distributions on the Mutual Funds were high. Looking at my 1040 you might think the market had a banner year.

Apparently the MFs sold a lot of stock that had much unrealized gain. I have held on to the individual stocks I own and would have done the same with ETFs rather than what the Mutual Funds did.

So after a flat at best stock market year, I have sizeable gains… and the taxes to go with it.

It is too late for this Geezer to switch but be aware.
With ETFs you get too choose when to sell and realize a taxable gain.
I only sell when I need to.

2

I’m still trying to figure out how I had $17K of dividends to report while the market was down around 20% last year.

2 Likes
3

Because those are not related…dividends are paid from a companies cash flow, not from the value of their stock.

3 Likes
4

If you ever get to a stage in your life when you’re in a lower income category (like waiting until age 70 to take Social Security), and the market is down, bite the bullet and take the capital gain, and then go to ETFs. I’m a geezer and I would never go back to MFs.

Long term capital gains tax is only 15% for many people, but it’s ZERO ZERO ZERO for tax year 2023 for married filing jointly income below $89,250. That’s like a Roth IRA ! Tax free! (well the dividends are not, but you get my idea).

Dividends are cute and cozy, but they suck from a tax point of view. If I could I’d always want my gains to come from long term capital gains.