Personal Finance

Question about Mutual Funds Distributions???

  • Last Updated:
  • Sep 5th, 2007 12:39 am
Jr. Member
User avatar
Jan 20, 2007
127 posts

Question about Mutual Funds Distributions???

If I want to purchase a mutual fund within my RRSP would it be better to buy it on Dec 31st or Jan 1st. Not sure how the distributions work when held inside an RRSP//Or does it even matter?
3 replies
Deal Addict
Jul 28, 2005
3237 posts
It doesn't matter in an RRSP. (And as an aside, most mutual funds make their annual distributions about a week before the new year, not on Dec. 31.)
Deal Fanatic
Jul 1, 2007
8315 posts
To give you an example of how a distribution works:

Fund XYZ has a Net Asset Value per Unit (NAVPU) of $10.
Dec 20th (or whenever they usually do their distributions) they distribute $1 per unit, bringing the NAVPU down to $9. If you automatically reinvest the distrubution, then the NAV of the funds you hold stays the same (all else remaining equal).

Whether you purchase before or after the distribution really makes no difference in the value of your investment, it just might be beneficial to wait until after the distribution to avoid the immediate tax liability.
Jun 19, 2006
9349 posts
...if its held outside a RRSP, distributes Canadian dividend income exclusively, and if you fall into a tax bracket that has negative taxation on dividends, then it might be beneficial to buy *before* the dividend is declared outside the RRSP, collect the dividend, and then roll the position into one's RRSP.

However, I guess, the resulting capital loss would be denied on the grounds that a related trust made an acquisition of an 'identical property' under the CRA rules for related party transactions.