That's right hookem, it's one of the most expensive way to make money. The tax rate is much higher than long term gains, and the qualified dividend tax rate (which is the type most large cap core funds pay) is 20-25% in most cases. I really must say though, Mutual Funds are designed as a long term investment type vehicle. And buying and selling based on cap. gain distribution is not advisable to my clients, large or small alike. Why, because I would much rather reinvest the cap gain distribution and accumulate shares over the long term. Why do more shares matter, because all future distributions of any type are paid on a per share basis, so more shares, more distribution. Now we could get in the weeds and discuss how some funds have a higher annual portfolio turn over rate than others, and it's a valid discussion in some cases. But in the limited scope of large cap core funds, most are managed with a annual turn over rate in the 20% range, and that is well within reason.
