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Can someone explain the concept of "buying the dividends" when purchasing a mutual fund?
Specifically, I understand that these distributions lower the NAV, but does it mean don't buy just before the distribution date? or just after? or is there a period of time after that it is not wise to buy. I'm looking at some Vanguard funds with distribution dates in December. Thank you.
1 Answer
- vegas_iwishLv 51 decade agoFavorite Answer
DO NOT BUY ANY MUTUAL FUND IN DEC IF NOT EX-DIV!!! You will be buying tax liability as will get hit with the year-end distribution of dividends & capital gains & must pay taxes on it though you receive no gain at all. All MFS have some tax liability as part of NAV & you are walking up to the table begging for some of it. Buying a dividend can be ok on a stock but not a MF. vegas_iwish@yahoo.com if more qs
Source(s): 27 yrs investing