Dividend Dump (bond, mutual funds, Fidelity, investor)

[caco54]

I have all my eggs in a Fidelity Basket. Every December there appears to be a large dividend payout that is a year long accumulation of funds. Typically when a stock pays a dividend the share price drops accordingly. This payout is different, will I see a fund share price drop?

[ChessieMom]

What is the stock that is paying the dividend?

[mathjak107]

Originally Posted by caco54

I have all my eggs in a Fidelity Basket. Every December there appears to be a large dividend payout that is a year long accumulation of funds. Typically when a stock pays a dividend the share price drops accordingly. This payout is different, will I see a fund share price drop?

all funds and stocks must drop in value by an equal amount unless they are bond funds accumulating interest and allocating it individually on the side

[Lowexpectations]

This also most likely isn’t dividend accumulation but rather cap gains distributions

[mathjak107]

a capital gains distribution is what it sounds like but in any case there will likely be a price reset to go with it .

you can not draw money out of a share value without it effecting that value as we both know.

know idea what a fidelity basket is as described

[StealthRabbit]

Originally Posted by caco54

I have all my eggs in a Fidelity Basket. Every December there appears to be a large dividend payout that is a year long accumulation of funds. Typically when a stock pays a dividend the share price drops accordingly. This payout is different, will I see a fund share price drop?

Sounds like Mutual Fund holdings. (Fidelity offers many other options than MF)

Yes, if dividends... Share price will drop. But, as mentioned, it's likely capital gains distribution (which mutual funds reconcile at end of their fiscal year).

Many mutual fund companies are offering the lower expense equivalent ETF. (ETF trades 'real time' and does not have annual CG distribution)
Both Vanguard and Fidelity have been offering the ETF alternative for several years, and just this year converted some MF to ETFs.

ETF is a great alternative for market tracking or sector funds. Some active managed diversified MF, cannot be replicated by an ETF, so those must remain as MF.

I would guess most active investors have replaced the majority of their index or sector MF with ETFs. I appreciate not getting the Dec tax hit (often tough to plan remediation ahead of time, so I ended up using my Donor Advised Fund to offset unexpected taxable gains). I most appreciate the ultra low expense ratio, and being able to trade ETFs immediately and as conditional trades and even as options. When I buy, I set my exit plan, and sleep well. (Usually a stop-loss @ % of 200 or 50 day moving average, or other readily determined technical analysis)

BTW, Fidelity Learning Center has many resources available (including a very helpful webinar presented yesterday)

[mathjak107]

i use both funds and etfs and they both have their positive and negative points .

the bad thing about funds is they if they are not in retirement money they are taxable yearly .

the good thing about funds is they are taxable yearly and they don’t become a potential tax torpedo like etfs can be .

making portfolio changes for retirement with decades of pent up taxes in an etf can be a hassle or tax problem to deal with .

it can make even simple changes stretch out over years …


etfs also sell at a premium or discount to nav .buy at a premium and sell at a discount and it can hurt you more then the mutual fund at nav .

also etfs can have some really weird pricing happen at times ..we had a mini crash where popular etfs like DVY became unhinged from what they owned .

orders were executed at a time DVY was down a whopping 35% while the holdings were only down 5% .

it finally corrected itself but not before orders executed at those crazy low prices for sellers

[GWoodle]

Originally Posted by caco54

I have all my eggs in a Fidelity Basket. Every December there appears to be a large dividend payout that is a year long accumulation of funds. Typically when a stock pays a dividend the share price drops accordingly. This payout is different, will I see a fund share price drop?

May depend on the Fund & when they do distributions. Fidelity should have a schedule posted for your particular Fund.

During the month could have both Long Term Capital Gain or Short Term Capital Gain. Difference in how you report numbers for tax purposes. Have different Capital Gain rate. Dividend could be paid during or on last day of the month.

Biggest trap could be if you don't watch Declaration Dates for when you must hold shares to get dividends. There may be some that buy the dividend.

The way 2023 has gone could be time to do a lot of window dressing. Fund may add to winners & dump losers to show Fund knows what they are doing. No guarantee of future results.