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Strategies & Market Trends : HOW MUCH MONEY IS YOUR GOAL???
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To: Yaacov who wrote (155)4/30/1997 9:27:00 PM
From: Kevin   of 470
 
Yaacov,
There is a very important issue regarding mutual funds that needs addressing. "Embedded capital gains"

When you own a mutual fund you are at the mercy of the fund manager regarding capital gain tax. many funds turn their portfolios over many times which creates hugh short term capital gains that get allocated to whomever is holding the share on the distribution date(usually last month of the calander year).

Secondly, many funds have/had hugh unrealized capital gains built into them due to this 6-7 year bull market. These are called embedded capital gains. When the fund manager realizes these gains WATCH OUT.I suspect that after our LITTLE correction these last four weeks or so much of the unrealized capital gains have been realized. You get to pay the tax on the gain even if you did not participate in any of that gain. You pay tax on gains that someone else enjoyed years ago. It's kinda like partying on someone else's dime

Whomever owns the mutual fund shares come distribution day will not be able to sit down for days <g>.

Third, most funds are so big they can not beat the market because they are the market. That's why big cap stocks are all that are going up. Anything else would not have a material impact on the performance of these mutual funds.

km

P.S. I have converted today from short term trading to an almost buy and hold approach. I'm tired of being strapped to this computer all day! I'm so tired of it I actually look forword to the end of the trading day so I can get back outside and continue painting the house!!

JT, do you think my hair will change back to brown from gray?<g>

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