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If you have held so-called tax efficient mutual funds in your taxable accounts, was the tax burden still overwhelming in April when you had to pay taxes on the earnings?
Related question: can an actively-managed equity fund be more tax-efficient than the respective index fund? For instance, small-caps tend to generate lower dividends than blue-chips, so a small cap index fund is more tax-efficient than an S&P 500 index fund. But what about an actively managed small cap fund? BTW, I raise this question without some snide attempt at enflaming factionalism between actively-managed and passive funds.
Related question: can an actively-managed equity fund be more tax-efficient than the respective index fund? For instance, small-caps tend to generate lower dividends than blue-chips, so a small cap index fund is more tax-efficient than an S&P 500 index fund. But what about an actively managed small cap fund? BTW, I raise this question without some snide attempt at enflaming factionalism between actively-managed and passive funds.
I don't know, but I'd say not many actively managed funds do, in practice. There are a few that could potentially do so, though.
I'm thinking of actively managed funds with very low turnover such as:
Amana Growth (0% turnover in 2017!)
Amana Income (1% turnover in 2017)
Mairs & Power Growth (9% turnover in 2017)
Mairs & Power Small Cap (19% turnover in 2017)
Voya Corporate Leaders Trust (0% turnover for decades)
Last edited by mysticaltyger; 06-16-2018 at 08:34 PM..
My thought was, for example, actively-managed mutual funds that focus on stocks that have zero dividends. 0% turnover of course also helps.
An interesting choice would be a hypothetical fund that scours the S&P 500 for stocks that do not pay dividends. An approximation would be Vanguard Tax-managed Capital Appreciation (VTCLX), except that its yield is nearly as high as that of the S&P500 itself.
never let the tax tail wag the tax dog . i would take a fund like fidelity contra over any of these tax efficient funds out here any day. give me gains that exceed the tax effect and i will gladly pay the taxes
My thought was, for example, actively-managed mutual funds that focus on stocks that have zero dividends. 0% turnover of course also helps.
An interesting choice would be a hypothetical fund that scours the S&P 500 for stocks that do not pay dividends. An approximation would be Vanguard Tax-managed Capital Appreciation (VTCLX), except that its yield is nearly as high as that of the S&P500 itself.
Amana Growth has almost no dividends, partly because it's a growth fund and partly because its expense ratio is high at 1.10%. Although it drops to a semi-reasonable .85% for investments of 100k or more. But, of course, that means the dividend yield shoots up from a whopping .43% for the Investor share class to a gargantuan .67% for the Institutional share class. Still low dividend payouts either way if you didn't catch the sarcasm.
Last edited by mysticaltyger; 06-17-2018 at 02:34 AM..
never let the tax tail wag the tax dog . i would take a fund like fidelity contra over any of these tax efficient funds out here any day. give me gains that exceed the tax effect and i will gladly pay the taxes
Amana Growth edges out Fidelity Contra for the trailing 15 and 20 year returns, although not for shorter time periods.
Can't predict the future, but I like that Amana Growth has:
--Very low turnover. Almost always in the single digits (typically not 0 like last year).
--Less Volatility than Contrafund.
--Much smaller asset base than Contrafund--only $1.8 Billion.
--The expense ratio is annoying, but for people like yourself and Ohio Peasant, the Institutional share class is more reasonable at .85% and quite accessible at 100K. The small asset base also means there's a reasonable chance it will drop significantly over time. Contrafund is so large, the expense ratio is highly unlikely to drop much more.
It's not a slam dunk, but it's a fund worth looking at, IMO.
Last edited by mysticaltyger; 06-17-2018 at 02:32 AM..
i am so surprised at it's performance for such a large fund . when contra closed many many years ago i was interviewed by the wall street journal and stated that i thought their days were numbered because they were so big .
boy was i wrong . it has been decades now that will danoff has been banging out superb numbers. he has been running the fund since 1990 .
-------------------------------------------------------
WALL STREET JOURNAL
Avoiding a Hot Fund Before It Closes
As Contrafund Closure Nears, Analysts Warn That Results Often Falter After Door Shuts
By Jennifer Levitz
Updated April 12, 2006 12:01 a.m. ET
When Matt xxxxxx heard that Fidelity Investments will be closing Contrafund, its star attraction, to new investors on April 28, he thought he'd better get in before the doors shut. The $65.2 billion mutual fund has had a 22% annual return over the past three years, trouncing broad stock-market indexes.
But after he did some research, he decided to pass. "I thought, you know, this is just silly. Contra's way too big," says Matt xxxxx ,a 53-year-old electrical-supplies salesman from Queens, N.Y., who describes himself as an active investor.
A number of analysts say Mr. xxxxx may have taken the right approach. Although there's often a rush of new money into hot funds that are closing, performance following a fund closure often falls off from the years preceding it.
Amana Growth edges out Fidelity Contra for the trailing 15 and 20 year returns, although not for shorter time periods.
Can't predict the future, but I like that Amana Growth has:
--Very low turnover. Almost always in the single digits (typically not 0 like last year).
--Less Volatility than Contrafund.
--Much smaller asset base than Contrafund--only $1.8 Billion.
--The expense ratio is annoying, but for people like yourself and Ohio Peasant, the Institutional share class is more reasonable at .85% and quite accessible at 100K. The small asset base also means there's a reasonable chance it will drop significantly over time. Contrafund is so large, the expense ratio is highly unlikely to drop much more.
It's a fund worth looking at, IMO.
Large cap growth funds have been outperforming in recent years. That won't always be the case. I prefer small/medium growth funds with fewer assets. Surprised that Danoff has been able to continue making these returns, given the fund's size. My guess is he makes some pretty large sector bets. With that said, there's no denying-he's good.
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