Purchasing a mutual fund or ETF before/after the ex-dividend date
Most articles I have read warn you against purchasing funds right BEFORE an ex-dividend date, since you just bought a fund and already have to pay taxes on the dividends, but don’t you also have gained the dividends, and you won’t be paying more taxes than the amount of the dividends.? So which thinking is correct?
If you extrapolate, if such a mutual find/ETF is inside an IRA, it is immaterial because anything in the IRA is not taxable, right?
Permalink Submitted by David Mertz on Mon, 2020-07-06 23:02
Buying the dividend in a taxable account just means that you’ll be paying taxes now instead of later. You’ll pay taxes on the dividend distribution but reinvesting it will also increase your cost basis. And, yes, that’s irrelevant inside an IRA.