Friday, May 12, 2006

Fidelity Magellan distribution

I have seen a lot of news out there over the past couple of days regarding Fidelity Magellan's whopping distribution of $22.36 / share on May 5, 2006. As you can tell by the chart above, the NAV took quite a hit. If you were unaware of the distribution, you probably had a mild heart attack when you viewed your Fidelity account.

According the Fidelity's website, a 'vast-majority' of Magellan's assets are held in tax-advantaged retirement accounts such as an IRA, 401k or 403b. If you are in the vast majority, the good news is this distribution has no impact on you since all distributions are tax deferred. If you are in the minority, the bad news is that you will be taxed on the distribution.

Although an 18% distribution is rare, potential mutual fund buyers should always check the list of upcoming distributions prior to buying a mutual fund (especially if the purchase is not for a retirement account). Such quick homework could save yourself a hefty tax bill soon after the purchase of a new mutual fund.


At 9:41 PM, Anonymous Anonymous said...

I was one of the people who did not see any distribution information and when I saw the drop I about had a heartattack and went into a small panic...I could not understand what the heck had happened. I am glad for the grand distribution is sure does make the drop palatable.


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