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Apply Before/After a fund's Distribution???

Discussion in 'Managed Funds & Index Funds' started by archangelsupreme, 20th Sep, 2007.

  1. archangelsupreme

    archangelsupreme Well-Known Member

    7th Sep, 2007
    Hello all,

    Most funds which have quarterly distributions will be making them at the end of September.

    If i'm a new investor and wanting to apply, are there any dangers in applying to the fund just before or just after the distribution?

  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    9th Jun, 2005
    Sydney, Australia
    If you apply just before the distribution, you will be receiving your capital back as income from the distribution - you will then pay tax on this and will have an unrealised capital loss on your investment.

    This can have benefits if you are attempting to do some form of debt recycling, or if you have realised capital gains you want to offset by realising a capital loss soon after distribution, but otherwise, it is generally less tax effective to invest just before the distribution.

    Generally I'd suggest waiting until just after the distribution (of course, if the unit price goes up 10% in the meantime, you'll be kicking yourself !! :rolleyes: ).