Fidelity Contrafund (ticker: FCNTX) appears to have dropped sharply today, roughly on the order of about 4% from the prior day’s net asset value, which is an unusually large one-day move for a diversified mutual fund. Despite this price drop, many of the fund’s major underlying holdings were reportedly up or flat, suggesting the move was not driven by broad market weakness in its core stocks.
Likely reason for the move
A key explanation circulating among investors is that the fund is going through (or about to go through) a large year‑end capital gains distribution, reported by one holder as being on the order of more than 40% of NAV for an upcoming distribution date. When a mutual fund declares a sizable capital gains and/or income distribution, the fund’s NAV typically falls by approximately the distribution amount on or around the ex‑distribution date, even though shareholders receive the distribution in cash or reinvested shares, so their total economic value does not drop by the full NAV decline.
What this means for you
For existing shareholders who hold through the record date, the apparent one‑day “drop” in price is mostly an accounting effect linked to the distribution rather than a permanent loss of value, though it can still trigger taxable gains in taxable accounts. For prospective investors, a very large imminent distribution can be a reason to wait until after the ex‑distribution date to avoid immediately realizing taxable gains on recently purchased shares; checking Fidelity’s official distribution schedule for FCNTX will show exact dates and amounts.
