It looks like mutual funds pass the gains, and the tax, onto those holding shared of the mutual fund.
> Because mutual funds are pass-through vehicles, they are required by law to distribute most of these gains to shareholders each year. These are called capital gains distributions.
Other types of funds don't necessarily have this problem, or lessen it.
> Holding mutual funds inside an IRA, 401(k), or Roth IRA shields you from annual tax bills.
> Index funds: Passive funds trade less frequently, leading to fewer gains.
> Tax-managed funds: Specifically structured to reduce taxable events.
> Exchange-Traded Funds (ETFs): Use an “in-kind” redemption mechanism that avoids triggering taxable sales.
It looks like mutual funds pass the gains, and the tax, onto those holding shared of the mutual fund.
> Because mutual funds are pass-through vehicles, they are required by law to distribute most of these gains to shareholders each year. These are called capital gains distributions.
Other types of funds don't necessarily have this problem, or lessen it.
> Holding mutual funds inside an IRA, 401(k), or Roth IRA shields you from annual tax bills.
> Index funds: Passive funds trade less frequently, leading to fewer gains.
> Tax-managed funds: Specifically structured to reduce taxable events.
> Exchange-Traded Funds (ETFs): Use an “in-kind” redemption mechanism that avoids triggering taxable sales.
https://mutualfundnation.com/mutual-fund-capital-gains/