Investor Profile Test | What Type of Investor Are You? | What Are Mutual Funds?| A Fund for Every Investor | How Mutual Funds Work | Purchasing Your Funds | What About Risk | Tracking Your Investment | The Terms | Tips on Funds | Mutual Funds Fees | How You Make Money
Mutual funds have a number of fees associated with them. No all funds charge all fees. Here's a brief overview of what you might encounter:
Mutual funds are required to pay 98% of their earnings annually to shareholders. You can choose to have your money automatically reinvested, you can have a check sent to you, or you can have it deposited into an account. With mutual funds, you make money from three sources: Dividends, Capital Gains, and Increasing Share Values.
Stock Funds: When a company in which the fund has shares issues dividends, you receive a proportionate amount based on the amount of your investment. You can decide whether to reinvest your dividends in additional mutual fund shares or be paid outright.
Bond Funds: All bonds pay interest. When a bond which the fund owns pays interest, you receive a proportionate amount of this interest. It is paid to you as fund dividends- either in cash or reinvested in your account.
Stock Funds: When the value of a stock in which your fund has invested increases, you receive the profits from the sale of that stock (when it is sold) as capital gains. The fund balances these gains against capital losses and pays you a capital gains distribution.
Bond Funds: Few bonds have capital gains associated with them, so income from this source is limited with a bond fund.
Increasing Share Value
Stock Funds: As the value of the assets it holds increases, the value of the fund itself increases. If it's a closed end fund, the value can increase significantly. You receive a proportionate amount of the increase when you sell your shares in the fund.
Bond Funds As the value of the assets it holds increases, the value of the fund itself increases. If it's a closed end fund, the value can increase significantly. You receive a proportionate amount of the increase when you sell your shares in the fund.
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