[USER]

I understand that when dividends are paid, the share price goes down by the amount of the dividend. Is that the same case with capital gains?

I have a mutual fund I want to liquidate. It averages around a $7,000 capital gains payment in December.

Wondering if I should wait until January to get the gains or if that won’t make a difference.

For example, if I have $100,000 in the mutual fund, when it pays capital gains of $7,000 in December, will the fund go down to $93,000 plus the gain of $7,000?

Or will I have the $100,000 plus the $7,000?

[Jeff]

The mutual fund price will also drop when capital gains are distributed the same way as dividends.

[Scott]

Yes, all else equal the funds’ share price will fall by the amount of the capital gain distribution similar to a regular income dividend

[Endri]

Actually it goes down by more in the long run, because they are not reinvesting the money in the business which has the capacity To produce more.

Dividends are major BS, a necessary evil.

[Rick]

No. Dividends are paid to everyone. Capital gains are paid by you to Uncle Sam at a time that doesn’t impact everyone.

[Endri]

To answer your precise question, something’s got to give, else we would all be in those mutual funds, and stocks that appreciate regardless of their dividend yield.

It would be nice to get a 7% yield on top of an sp 500 avergae appreciation but we all know there is no such thing as a free lunch.

Same thing on mutual funds, not only they go down by how much they distribute, they go down even further because there is a hidden opportunity cost, extra government tax and money not reinvested.

[Author]

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