Executive summary: Looking to get a jump on capital gains-related tax and portfolio planning? Thanks to Vanguard’s transparent reporting, we know how much each fund has realized in capital gains through September. I use that data to tell you how much you can expect to receive in capital gains in December—before Vanguard releases its official estimates. I’ve also done the math to tell you what to expect if you follow an IVA Portfolio.
Capital gains distribution season is fast approaching, and while Vanguard will provide more information around November 11, I have a sneak peek of what’s to come.
If you need a refresher on capital gains, see my Capital Gains 101 and 102 articles. If you don’t have time for those articles, here are the absolute basics:
Every December, Vanguard, like all its mutual fund and ETF industry competitors, must pay out interest, income and trading profits (called capital gains) that have accumulated over the year. You'll receive a distribution if you own a fund on its record date.
As a fund shareholder, you are taxed on the capital gains you receive, even if you automatically reinvest the distribution into the fund. (Though you don’t have to worry about this for funds you hold in retirement accounts like a 401(k) or IRA.)
So, the question of how much you’ll receive in capital gains is always at the top of investors’ minds as the end of the year approaches.
It’s never too early to start planning.
An Average Year Ahead
I can help you get a jump on things because Vanguard reports monthly on the capital gains status of each of its funds. I’m unaware of any other fund company that does this—and I applaud Vanguard for it.
This data gives me early and fairly accurate insights into how much each fund is poised to distribute as the year comes to a close.
While the numbers can (and do) change before distributions are paid, the changes tend to be pretty small between September and December unless exogenous events—such as a large redemption or Vanguard firing a manager—change a fund portfolio’s constitution.
In the table below, you can find all of the Vanguard funds that have booked realized gains as of September 30.