Taxation of Capital Gains - Mutual Funds / ETFs

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[fatalhorizon]

This only tells half the story. The capital gain distribution increases your cost basis, so less tax is paid on the back end when you sell. Also, if there isn't a one in a lifetime market drawdown, then the capital gain distribution won't be nearly that bad. 2008 was not common. Some years you don't have CG distributions. Sound advice would be more along the lines of "watch out for investing in a mutual fund close to the end of the year if that fund is set to pay out a large capital gain distribution" rather than "all mutual funds are bad."

[jakejohnson]

So essentially, if you keep the Mutual Fund prioritized for your Roth IRA only AND prioritize your brokerage accounts for ETF's, you should be safe from a tax point of view in case of a loss?

Also - can you please explain where these long term capital gains come from in a mutual fund? I see it reinvests yearly and I still am not 100% on where/ how it comes from. Maybe I missed it. I am still learning.