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Fund Spy

Capital Gains Roundup: 2020 Edition

As the year winds down, growth-fund investors are most likely to get socked with tax bills.

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Own an actively managed growth stock fund in a taxable account? You may well receive a tax bill, based on the latest round of mutual fund capital gain distribution estimates.

Several growth funds are poised to pay out double-digit percentages of their net asset values, and many more are making payouts in the high single digits as a percentage of NAV. Yet again, the convergence of redemptions from investors who are increasingly swapping into exchange-traded funds and other types of passive products, plus strong performance in the underlying holdings, has prompted significant selling of appreciated assets at many growth mutual funds. Those sales translate into capital gains distributions, which in turn are taxable to shareholders who own the funds in taxable accounts. Fund companies have begun making estimates of their distributions available on their websites, and most will make their actual distributions in early to mid-December.

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Christine Benz has a position in the following securities mentioned above: HACAX, VPCCX. Find out about Morningstar’s editorial policies.