Investing Basics flipbook_2024

When mutual funds are held in taxable accounts, distributions are taxable to shareholders (as long-term and/or short-term capital gains, dividends, or interest) for the year in which they are received, even if the distribution is reinvested in new shares. Of course, investors may also trigger capital gains taxes when they sell fund shares for a profit. Mutual funds must distribute capital gains that are not offset by losses to shareholders on an annual basis. Any interest or dividend income generated by a fund is also passed along to shareholders. When a distribution occurs, each investor receives a payment equal to the per-share distribution amount multiplied by the number of shares he or she owns, and the fund’s daily price (or net asset value) is reduced by the same amount. Some types of mutual funds turn over securities more frequently and may trigger more taxes than funds with a passive investment style. Investments that generate interest or produce short-term capital gains are taxed as ordinary income at higher rates than long-term capital gains and qualified dividends. Before purchasing mutual fund shares, you may want to check the timing and amount of upcoming distributions so you don’t incur unnecessary taxes on gains that you didn’t participate in. The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost. Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. Prepare for Fund Distributions