, Columnist
Vanguard Investors' Tax Woes Don't Have to Happen to You
Capital gains in mutual funds can deliver some shocking tax hits, but ETFs can solve the problem.
ETFs don’t come with the tax baggage.
Photographer: Eva Marie Uzcategui/Bloomberg
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Investors in a Vanguard target-date mutual fund got a nasty surprise last month when they were hit with a whopping tax bill for capital gains. They're not alone.
Data compiled by CapGainsValet shows that in 2021, a record number of mutual funds made larger-than-average capital gains distributions. Gains are recorded when fund managers sell some of their appreciated holdings, often to give departing investors their money back or to buy different investments.