14 What are "capital gain distributions"?
Description
This article is from the FAQ, by with numerous contributions by others.
14 What are "capital gain distributions"?
A mutual fund may, in the process of trading, realize capital
gains. These must be distributed to investors. As with dividends,
there is usually the option to reinvest in additional fund shares.
Capital gain distributions generally occur late in the year, but
some funds make additional distributions at other times. Funds
with high turnover of securities often make significant capital
gain distributions every year, while funds with low turnover of
securities may accumulate unrealized gains for several years before
making a large capital gain distribution. Also, funds that are
increasing in size tend to make smaller capital gain distributions
because they buy more than they sell, while funds decreasing in size
tend to make larger capital gain distributions because they sell
more than they buy.
Continue to:
My Books
