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Please explain me distribution in mutual fund...

  • Last Updated:
  • Dec 19th, 2016 10:31 am
[OP]
Jr. Member
Mar 20, 2009
119 posts
66 upvotes

Please explain me distribution in mutual fund...

I have a mutual fund with td, ( tdb900, tdb902, tdb909 and tdb911)

I understand that the fund drop the amount of distribution but I get more share. What I am not sure is what are the advangtages in a tfsa and rrsp ( for distribution)

If I did not earn new money....
9 replies
Member
Dec 7, 2007
341 posts
305 upvotes
In registered accounts there are no advantages/disadvantages.

Funds need to make distributions annually for tax purposes - and unit holders are responsible for paying those taxes. In non-registered accounts that results in potential tax implications - which do not exist in registered accounts (TFSA, RSP).

At the end of the day distributions aren't about advantages - they are about taxation.

https://retirehappy.ca/understanding-mu ... ributions/#
Deal Addict
Jan 20, 2016
1977 posts
947 upvotes
Houston, TX
This article sound a bit odd to me. When I have distribution on my mf, I actually get NEW money - new units are added but I do not see price drop. In fact the "booked" value increased on amount of distribution
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Deal Addict
Jan 20, 2016
1977 posts
947 upvotes
Houston, TX
Theoretically it's quite good (except some uncertainty in their explanation like "some funds occasionally...")
TD bond funds paying distribution monthly, tdb902 (us index cad nominated) pay yearly while same US index but hedged tdb904 do not pay at all...
Will try to watch them this year closely to see how it goes
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Deal Addict
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Aug 4, 2014
1729 posts
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Toronto, ON
I think you're confusing capital gains and dividends distributions :)
Deal Addict
Jan 20, 2016
1977 posts
947 upvotes
Houston, TX
TD do not says is it cg or dividends, it names then "distribution"
But, from % amount, at least for tdb900/tdb902 it do looks like dividends...

Etf are but more on that imo.

Could not say it's a game changer for me :) anyway, I keep mf only on two accounts with small balances
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Sr. Member
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Feb 1, 2012
959 posts
1007 upvotes
Thunder Bay, ON
asa1973 wrote:
Dec 16th, 2016 7:58 pm
TD do not says is it cg or dividends, it names then "distribution"
But, from % amount, at least for tdb900/tdb902 it do looks like dividends...
Mutual fund and ETF distributions can consist of several items including dividends, foreign income, capital gains, interest, return of capital. Equity fund distributions will be mostly dividends (for Canadian funds) or foreign income (for global funds), but may also include capital gains if the fund sold equities during the year. Bond fund distributions will be mostly interest, but may contain capital gains if bonds mature or are sold. Index ETFs and mutual funds tend to be more efficient and distribute less capital gains because they track indexes rather than actively trade.

Some time after the end of the year the fund should issue a statement detailing the composition of the distributions. That is only relevant in non-registered accounts since taxes are due on the distributions. It's irrelevant in TFSAs and RRSPs since the distributions either are not taxed (TFSAs) or taxed as ordinary income in the year the funds are withdrawn (RRSPs).

This complexity is why some experienced investors prefer to hold securities directly, where there are no multi-component distributions to track and report.

That concludes today's lecture. Join us tomorrow for the next lesson "Market Timing: yay, nay or hooray" :)
Invest your time actively and your money passively.
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Aug 4, 2014
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Deepwater wrote:
Dec 16th, 2016 8:29 pm
That concludes today's lecture. Join us tomorrow for the next lesson "Market Timing: yay, nay or hooray" :)
Can't wait.. lol
Deal Addict
Jan 20, 2016
1977 posts
947 upvotes
Houston, TX
D day (Distribution Day) for TD mutual funds :)

As we already know from previous lecture ;) NAV price fall on % amount of distribution with new units added to "book value" so ACTUAL balance remain same , you just have more units on less price...
(do not shown in TDDI yet in full, price dropped but units not added ;/) usually they update MF activity about 11am
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