Automatic reinvestment for mutual funds

[ToushiTime]

Hi,

Basic question:

If I buy an eMaxis mutual fund using the tsumitate function set to reinvest the returns/distributions, are those returns untaxed as they are immediately reinvested?

Or is that just wishful thinking?

[adamu]

Most of the eMaxis funds reinvest internally anyway, meaning there aren't any dividends, only capital gains.

If for some reason the fund did pay out, you would pay dividend tax on it before the automatic reinvestment (if it's in a tax collecting tokutei account).

[ToushiTime]

Thanks.
So I am weighing up eMaxis Developed Nation Bonds vs iShares TIP ETF.
The TIP ETF pays out monthly I think…
Do you think the relative tax advantage of eMaxis would outweigh the drawback of its lack of inflation protection?

[eyeswideshut]

Thanks.
So I am weighing up eMaxis Developed Nation Bonds vs iShares TIP ETF.
The TIP ETF pays out monthly I think…
Do you think the relative tax advantage of eMaxis would outweigh the drawback of its lack of inflation protection?

In order to answer we would need to know the future which we can't. All you can know for sure is that, taking currency out of the equation, if the yield performance of the 2 funds were the same, then the reinvestment fund will perform better as you will be investing more over time (no tax drag and no delay in reinvestment). That said, I doubt the difference would be overly significant so it is better to invest in the asset you think will perform better.

[ToushiTime]

Thanks.
I think I'll go for a mix of the TIP and VTIP bond ETFs, and the eMaxis Developed Nation Bond mutual fund.
I may put the TIP and VTIP ETFs in NISA next year, if that is possible.