Series 24: Dividends And Capital Gains

Dividends and Capital Gains

Mutual funds can earn income within the fund in the form of dividends or capital gains. Dividends are earned when a dividend is paid out from a security held by the fund. Capital gains are paid out when a fund sells securities that have increased in value. The investment company may distribute income from dividends to shareholders whenever they see fit, but they can distribute income from capital gains no more than once a year. The company must send out a letter that clearly delineates which distributions are capital gains and which are dividends. The shareholder will be responsible for paying t