Buy Mutual Funds et the end of the Year
Many smart investors buy mutual funds at the end of the year after the fund management company distributes the Capital Gains to it’s Investors. This is to avoid tax liabilities. You can read my article about Why you should not buy mutual funds in December and even if you want to buy, buy after the fund house distributes the capital gains.
Here is the logic of why is it unadvisable to buy mutual funds in December?
Many mutual funds make large capital gains distributions in December. You have to pay taxes on those gains. (They may make them at other times of the year as well, but December is a very common month).
Example: You buy a fund on December 1. The fund goes ex-dividend on December 10 and you receive a $2,000 distribution. You have to pay tax on the $2,000 even though you just purchased the fund and may not even have made any money yet.
If you wait until just after the distribution, you won't have to worry about this until the next one. Some funds pay distributions at other times of the year, so it can be beneficial to read the prospectus and time your purchase accordingly.
So now you understand that, why you should buy mutual funds after the distribution of the capital gains? However, the distribution month of every mutual fund is different in USA. So you should carefully read the prospectus before taking the investment decision in the mutual fund.