Check your stocking: 'Tis the season of giving, and funds across the land are getting in on the gifting game by doling out end-of-the-year distribution payouts to shareholders.
Distributions are paid out as dividends or capital gains, with dividends and long-term (one year or more) gains enjoying a 15% tax rate and short-term gains typically carrying a higher tax load. Taxes on any kind of payouts apply to all shareholders as of the "date of record," a day specified by the fund company that falls shortly before the distribution payout date.
As long as you own a fund on the date of record, fund companies don't care if you've held the fund for five days or 5,000 -- you're getting the payout. As such, you'll want to hold off buying (or adding a big pot o' money to) that fund that makes your heart pitter-patter until after the date of record. Otherwise, you'll pay for gains you didn't get when it's time to cut that April check to Uncle Sam. (While you're waiting, be sure to take a gander at our Champion Funds newsletter service, where we unwrap only the best of the best.)
Among the more prominent diversified domestic stock funds set to spread the joy: Fidelity Magellan
If you own mutual funds solely through your 401(k), IRA, or other tax-deferred account, distributions don't affect your tax bill until withdrawal time. So go on, finish your nap.
Curious about the payouts from other funds in your portfolio or on your wish list? Check for estimated distribution amounts and dates on your fund companies' websites. And remember, no early shopping!
Fool contributor Josie Raney owns shares of Vanguard 500.