The Impact of Mutual Fund Distributions on After-Tax Returns

Authors

  • William Lewis Randolph Department of Finance, School of Business, Norfolk State University, Norfolk, VA 23504.

DOI:

https://doi.org/10.1016/1057-0810(94)90018-3

Abstract

This paper analyzes the impact of mutual fund distributions on after-tax returns. Mutual fund objective and management style are the two most importantfactors which determine the proportion of thefund’s total return that ispaid out in distn’butions. The larger the fund’s annual distributions, the greater the amount of return lost to taxes. The correlation between portfolio turnover and after-tax return is examined and found to be low. A measure of effective portfolio turnover is developed to show the real effect of turnover on distributions. Within some mutual fund categories, the investor can increase after-tax returns by one or two percent by selecting funds with low distributions.

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Published

1994-12-30

How to Cite

Randolph, W. L. (1994). The Impact of Mutual Fund Distributions on After-Tax Returns. Financial Services Review, 3(2), 127–141. https://doi.org/10.1016/1057-0810(94)90018-3

Issue

Vol. 3 No. 2 (1994): Financial Services Review

Section

New Original Submission

License

Copyright (c) 1994 JAI Press Inc.

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