Mutual funds distributions are different from the dividends paid by stocks. Stock dividends are usually a distribution of profits.
Most mutual funds are set up as trusts and pay tax at the highest rate on any gains (interest, dividends, capital gains) that are held in the mutual fund. In order to avoid paying tax at the highest rate the mutual find flows through the gains to unit holders. Some mutual funds also distribute a portion of the original capital.
Consequently, the distribution paid by a mutual fund does not simple reflect the dividends paid by the stocks held by the mutual fund.
If you have any further questions, or feel that I could be of assistance, please do not hesitate to contact me.
.JPG){kind=avatar}
Most mutual funds are set up as trusts and pay tax at the highest rate on any gains (interest, dividends, capital gains) that are held in the mutual fund. In order to avoid paying tax at the highest rate the mutual find flows through the gains to unit holders. Some mutual funds also distribute a portion of the original capital.
Consequently, the distribution paid by a mutual fund does not simple reflect the dividends paid by the stocks held by the mutual fund.
If you have any further questions, or feel that I could be of assistance, please do not hesitate to contact me.