capital gains distribution


Definition
A payment to investment company shareholders of profits realized on the sale of its securities. Equity funds usually pay out these amounts once a year, typically in December, while bond funds often include capital gains in their monthly distributions. Many funds allow automatic reinvestment of capital gains, instead of distribution. In general, capital gains distributions reduce the value of the fund. Also, these distributions are taxable income for the recipient, so funds that allow reinvestment instead of distribution are sometimes preferred by investors in high tax brackets.

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