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Year-End Distribution FAQs

Mutual fund distribute income and capital gains to shareholders at the end of the year.

Distributions can trip up even experienced fund investors, so we put together a few FAQs to help you get up to speed. 

1. When do funds pay distributions?

Most stock funds make distributions in December, but some pay distributions in November or on the first business day of 2020. 

2. What should you expect?

Falling share prices. When a fund pays a distribution, its share price drops by the amount of the distribution. This is normal and doesn’t necessarily mean your investment has lost money.

Reporting services like Yahoo Finance don’t always catch a fund’s distribution, so it may look like a fund has lost money when really it’s just made a distribution.

3. How are distributions paid?

You can have distributions reinvested in new shares or paid in cash. Fund performance assumes distributions are reinvested.

4. Who gets a distribution?

All shareholders on the fund’s record date (often, but not always, the day before distributions are paid) get the distribution. Investors who own funds in taxable accounts will have to pay taxes on distributions.

5. Why do funds make distributions?

If a fund doesn’t distribute gains and income to shareholders, the fund has to pay taxes on it. 

Get detailed information on distributions and tips on what to do if a fund is making a big payout this year in the December issue of NoLoad FundX.