How to Avoid Capital Gain Distributions

A lot of people fall into this trap. They say, Oh, hold on. There's a fund that's going to have a 13% distribution. I should go buy that right now because I'm going to get a 13% rate of return as soon as that pays out. But guess what happens? You do get the distribution where you will end up paying the income taxes on that if it's an taxable account. So no, it's not a win situation. Your market value of the holdings adjust and it's still worth the same amount. It's just now you own a bigger tax bill on the portion that was distributed out to you. All you are getting is a tax bill