Silver Lining: Funds' Capital Gains Hit 20-Year Low

An early tally says stock funds' taxable capital gains distributions plummeted last year, offering ravaged investors modest solace after two down years.

Cap gains distributions from stock and bond funds totaled less than $40 billion last year, according to figures released Tuesday night by the New York fund consultancy Strategic Insight. That's well off the record $325 billion in cap gains shelled out in 2000, which added up to some 7% of stock and bond funds' assets. If the firm's estimate for last year is accurate, last year's distributions added up to less than 1% of funds' assets -- the lowest in 20 years.

The upshot for fund investors is that unlike 2000, when fund managers were still selling shares that were in the black, most won't be left in the unenviable position of paying taxes on a fund that's underwater. Because low distributions mean low taxes to Uncle Sam, the news should bolster support for legislation that would allow fund investors to defer paying cap gains until they actually sell their fund shares. ...