Mutual funds are structured so that they must proportionately distribute their earnings from dividends and/or capital gains to investors at the end of each year. The date of the fund distribution is called the ex-dividend date. If investors buy shares just before the ex-dividend date, they will owe taxes on their distribution, even though they have owned their shares for just a short time. This applies only to fund shares in taxable accounts. If you buy fund shares in a retirement account, this is not an issue because the account is tax-deferred.
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