Reply to Vanguard Target Date funds (in taxable accounts) --- WHAT IS GOING ON?

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Reply to "Vanguard Target Date funds (in taxable accounts) --- WHAT IS GOING ON?"

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I love how everyone complains about capital gains. Would you rather they lose money? And I bet the majority of the posters here think capital gain tax rates to increase. [/quote]

It's not like the "capital gains" means that the funds made money.  Vanguard SOLD a huge portion of its assets, triggering a huge capital gain, then re-invested the cash in the slimmed-down portfolio.  The only reason Vanguard did that is because it lured a majority of the investors out of the Target Date funds and into the "Institutional Target Date Funds."

We're not talking about a small adjustment of investors moving from one to the other.  Vanguard dropped the entry ticket for the institutional funds from $100million to $5million!  That means the regular target date fund USED TO serve investors with $100million or less.  NOW, the regular target date fund ONLY serves investors with $5million or less!

When all those investors left, Vanguard needed to sell off assets --- and the little guys with $5million or less got stuck with an astronomical tax bill.  [/quote]

Exactly as an investor you could actually have a loss in these funds depending on when you put your money in and still be hit with this large capital gains distribution.  This is not paying tax on profit that you made,[b] it is paying tax on profit the fund itself made years ago but that you might never have seen yourself[/b].[/quote]

Very good point. [/quote]

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