Sell off mutual funds before or after dividend payout? Tax question.

Omainec

Member
So, finally, untill the end of this year I will sell all my expensive mutual funds (Postfinance) and DCA the money during a relatively short period of time into my IBKR ETFs ... Now to my question: My Postfinance fund will payout some dividends in November. Do I sell them better BEFORE that date (to spare some taxes)? Or do I wait untill after the payout, to take the dividends with me?

I understand that dividends do not matter in the long run. But I am not sure about the implications short term. I.e. I do not know how fast the funds will adjust (lower) their value after a dividend payout.

Thanks!
 
Hi @Omainec

If you are going to sell anyway, I do not think it matters to wait. Generally, distributing dividends result in a loss of stock share (since the value is now lower). So, selling now and buying again with IBKR is likely best.
 
Hi @Omainec

If you are going to sell anyway, I do not think it matters to wait. Generally, distributing dividends result in a loss of stock share (since the value is now lower). So, selling now and buying again with IBKR is likely best.
Yes sure, I understand that. But is the correction happening immediately? Or will the share price adjust gradualy? I wonder if there is any evidence about this, I'm not sure what I should be looking for ... maybe I will ask Chat GPT, if I'm in tghe mood ...
 
Chat GPT thinks this:

The price adjustment of an ETF on the ex-dividend date usually happens immediately, but there are some nuances to consider:

  1. Market Opening: On the ex-dividend date, the price of the ETF is typically adjusted downward by the amount of the dividend at the market open. This means that the ETF's price is generally lower right after the first trade on the ex-dividend date compared to the previous trading day.
  2. Market Reactions: However, the exact timing of the price adjustment can vary. While the adjustment typically occurs at the start of the trading day, supply and demand can influence the price throughout the day. This means that the ETF's price can fluctuate based on trading activity and market conditions.
  3. Gradual Adjustment: In some cases, there might be a gradual adjustment over a longer period, especially if investors anticipate the dividend and adjust their trading strategies accordingly. This could lead to a temporary increase in the price before the ex-dividend date, followed by a decline on the ex-dividend date itself.
Overall, the immediate price adjustment on the ex-dividend date is the norm, but various market forces can influence the actual behavior of the price.
 
Looks to me, as it would be maybe wise to sell the fund BEFORE the dividend day, as I will spare the dividend taxes then ... Or do I miss something here?
 
I agree on ChatGPT, it will mostly happen immediately.

Depending on how fast you do it, you will receive the dividends in your new broker, so it will not change much :)
 
Hey, I had a similar dilemma. It's better to sell before the dividend payout date to save on taxes.Short-term, it makes more sense since the fund may quickly lose value after the payout.
Additionally, it's worth consulting a tax advisor to confirm this decision. :)
 
Hey, I had a similar dilemma. It's better to sell before the dividend payout date to save on taxes.Short-term, it makes more sense since the fund may quickly lose value after the payout.
Additionally, it's worth consulting a tax advisor to confirm this decision. :)
Thanks Ala, that's what I'm thinking also.
 
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