Hi, PF.
Basically the title.
Noticed extra cash in my Vanguard brokerage – was initially suspicious. After looking at the transaction history it looks like Vanguard realized my gain on VWUSX holdings (both short-term and long-term). This happened in both IRA and regular brokerage account.
Why does this happen? I was not expecting to pay taxes on my gains, or even realize them. Was just going to hold.
Very confused by what’s going on.
Pretty common with mutual funds — some years are less some years are greater but usually around December is when they do a bit more housekeeping and return to fund holders cash from the realized gains (short or long or blend).
Capital gains distributions.
All mutual funds are required to distribute their gains (both dividends and internal capital gains) to their holders every year.
Index funds generally have little selling activity, so capital gains distributions are much smaller if anything.
In your case, VWUSX and VWUAX (admiral) had huge capital gains this year (over 11% of NAV). One of the downsides of actively managed funds.
Edit for clarity.
This is one of the reasons why many prefer ETFs over Mutual Funds in a taxable account.
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