People seem to think of a large capital gains distribution from a mutual fund as a bad thing. (A distribution in the tens of thousands, say, or one worth 10-15% of your holding in that mutual fund. See Vanguard VTIVX in 2021 for a recent example).
But why exactly? This isn't meant as a rhetorical question. I'm wondering what I'm missing. The value of the fund's share price will go down in line with the distribution. So the net effect there is 0. You have to pay capital gains tax, but you would have to do this anyway if and when you sold the stock.
If one were a pure dividend income investor, wouldn't this be an opportunity to buy more dividend-bearing stocks in this same fund, or via another investment? You might be taking a hit in terms of total value, for now at least, but you get the opportunity to increase your dividend income by buying more shares (and wouldn't the fund's share price be lower in fact, because of the distribution?).
It's obviously a hassle to have to account for a large distribution you weren't expecting, and for the time and manner of that distribution to be outside of your control. But that doesn't seem like enough to inspire the dread and sometimes rage a large CGD seems to produce in some people. So what's the reason for that?
All insights appreciated.
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