Stories Telling You To Watch Out For Capital Gains Tax

This past week I've seen a couple stories more or less taunting already wounded mutual fund investors that despite their losses they're about to get hit with capital gains taxes, too. "Just when you thought your mutual fund losses couldn't get any worse, your fund might be about to add insult to injury," warns the Chicago Tribune's Gail MarksJarvis. "Now we have to brace for a second whammy," worries Allan Chernoff, at CNNMoney.

But not everyone has to worry.

First off, if your mutual funds are in your retirement account, you don't care at all.

And if you're in an index fund, this is another time to be happy about that. I took a look at Vanguard's Total Stock Market Fund's distributions chart. As of the end of September the fund had a realized capital loss of $1.15 or 4% and had an unrealized loss of fifteen cents or half a percent.

If you're in an actively managed fund in a non-retirement account, there could be some trouble. The country's most popular fund, the Growth Fund of America, doesn't list this year's capital gains on its website. Last year the fund returned 11% and had a long-term capital gain of $2.06 on an NAV of $33.41. But the fund does have relatively low turnover--which makes for relatively low capital gains.

And it's not necessarily bad news.

Vanguard's actively managed Windsor Fund also shows capital losses this year. (Which is normally not good news, but in the context of taxes is. You don't pay taxes on your losses.)
So, don't get too scared by those stories.readmore