2017 Income and Capital Gain Distributions

December 7, 2017 12:00 pm

Unfortunately for many, 2017 will not be as tax-friendly of a year with several widely held funds already reporting estimates far north of our numbers.

As we know from different economic cycles across both bull and bear markets, the tax implications from capital gains can vary dramatically and its important to position yourself in the best possibly manner. The following illustration provides some interesting figures for open end mutual funds as well as realized capital gains.

We know that the expected year-end capital gain and remaining income distributions may vary. However, at our portfolio level, the expected capital gain distributions will range from approximately .25% to 1.50% with remaining income ranging between .30% to .70%.  These distribution rates are surprisingly small given the performance of the equity markets over the past year. Out of our most commonly held positions, only a few funds are expected to make modest distributions between 2-4%. Its also likely for most clients, we have positioned these less tax-friendly funds in a tax-deferred qualified account therefore having no impact on our clients. Last but not least, more than half our clients’ fund holdings are not expected to be making any capital gain distributions at all. This is significantly different compared to many of the most widely held investor funds listed below.

The good news is that for the fund strategies we utilize, our numbers are expected to be much lower than many of the widely held funds by investors. If you happen to be an investor in a retail fund or perhaps a high turnover strategy, you should keep an eye on your 1099s as they may indicate an increase in your tax liability. This information may also present a great opportunity to implement changes by selecting a more tax-efficient alternative.

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Source:  Dimensional Fund Advisors, Kwanti Analytics, Morningstar Direct, Capital Directions, LLC. M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees. There are many different interpretations of investment statistics and many different ideas about how to best use them. Nothing in this presentation should be interpreted to state or imply that past results are an indication of future performance.

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This post was written by Marc Jimenez, CFA, CFP®

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