October 24, 2007 at 3:18 pm by Tom Lydon
If you needed another reason to invest in exchange traded funds (ETFs), here’s one: Many mutual funds are finding they’ll be paying out big taxable distributions this year, and some industry experts are predicting the highest distributions ever, according to The Wall Street Journal. In comparison, ETFs rarely change their holdings and track indexes, so they hardly have any distributions, which means less tax payments for investors.
The main reason behind the payouts is the significant increases in stock prices despite an OK year in the stock market. Several mutual funds also have used up their offset supply of losses built up during the bear market. American Funds’ New Economy mutual fund, for example, recently exhausted its losses and will probably post a capital gain distribution for the first time since 2000, reports Joe Morris for Ignites. Last year, mutual funds paid out $259 billion, the most since 2000, according to ICI data.
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