There are only two things in life that are absolutely unavoidable, death, and taxes. You investor advisor is telling the truth. As the fund declined, they had to sell stocks to meet the withdrawals. They make every effort to avoid selling things that will cause you to have a taxable gain but eventually they have sold everything that does not require a tax bite and they have no choice to but to sell investments in which they have a gain, thus triggering a taxable event for all the fund holders.

If you possibly can, pay the tax out of pocket and you will not need to sell the fund. If you can't do that, just grit your teeth and take the hit.

I never make specific investment recommendations and this is not a recommendation for or against the fund. Your fund has a four star rating by Morning Star. That is quite good. It also has a 1% deferred load which means you will have to pay a 1% fee on the withdrawal. The expense ration is 2.22%. I consider that too high but if they make you money, who cares?
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yup, as explained above... it happens. i'd sell the shares and buy QQQQ or SPY instead. (Those are ETFs based on the Nasdaq and S&P)

Why is this in a non tax deferred account? Have you maxed out your 401K and IRA contributions? If this fund were in a tax deferred account, you wouldn't need to worry about tax on the capital gains. (well, not until after retirement.)
Source(s):
listening to Bob Brinker

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Apparently it is common in years when stock investments do poorly to sell and then repurchase them (after a suitable waiting period) at the end of the year to register a loss which can be used as a tax deduction or to offset gains. It is possible to loose money doing this if the market goes up after you sell and you're forced to repurchase at a higher value, but conversely, if the market continues to fall you may actually be able to buy more shares with the same cash outlay later on.
So no, your investment advisor is likely not just looking to make a quick commission, he seems to be giving sound advice for a mutual fund in this economy.
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Your broker is giving you sound advice if your goal is to avoid paying the tax. You cannot avoid paying the tax any other way unless you have losses from previous years that you can carry forward to offset the gains, or you have other underwater assets that you can sell at a loss.

Your broker will get a commission, but it appears that his advice is correct. The only way to avoid the tax is to recognize a loss and offset the gains.

In this market, I would not expect the price of your fund to return to its previous levels any time soon. So, don't tie your money up waiting for it to come back, take the loss and move on.
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Here is some advice:

First question: There is not much you can do without touching your investment to prevent the capital gains distribution.

Second question: He is not necessarily looking for a commission, but it could be a factor in his advice. He probably does want to prevent you from paying the $1,000 capital gains tax. If you follow his advice, you will feel like you saved $1,000 and he will have made some money, which is a win for both parties.

I also took a quick look at the fund and it looks ok, but a little expensive (2.22% expense ratio) Four stars from Morningstar means it is an above average fund.
Source(s):
http://quicktake.morningstar.com/FundNet/Snapshot.aspx?Country=USA&pgid...

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