I have seen the advice of not to invest in an index / mutual fund at the end of the year. The reason seems to be that this is when these funds pay out dividends which is taxable.
Capital gain is taxable anyway, no matter when I invest. So I should still make my automatic investment during end-of-year, correct? The only reason a person shouldn't start investing at year-end is because he will suffer the tax bill without the benefit of having invested throughout the year prior.
Even if he start investing at year end, can he still soften the blow by re-investing the dividend instead of cashing out? That way, he does not have to pay short-term capital gain tax on the cashed-out dividend.
If this "softening" works, how much does it help? How bad is it to start investing at the end of the year?