Frequently Asked Questions
There are several descriptions for ‘fund distribution’ within the world of finance; however, generally speaking, the term refers to the payment going from an individual security, account or fund to an investor. Traditionally, distribution funds have been thought of as ‘steady’, being a reliable part of one’s investment portfolio.
Another definition of fund distribution is when a company or mutual fund pays its shareholders in cash, stock or by another form of pay-out. No matter the exact type of distribution, it is typical for the payment to be paid directly to the beneficiary, by cheque or electronically.
Distributions from mutual funds describes the periodic distribution of capital gains and dividends – or income from the interest generated by the fund – which is allocated to each of the individual investors. One of the most common types of distribution from mutual funds is a ‘net capital gains distribution’, which is calculated from the profits from the sale of holdings held by a mutual fund.
Stock and bond distributions are based on the payment of interest, dividend or principal to the shareholders/bondholders. These payments are sent by the issuer of the security, and the payments are made regularly. Investment trust distributions are the payments to investors from the income that is generated from an investment trust.
Rtirement account distributions are available in two types: those made before the age of 59 ½ , which are subject to a penalty and income tax, and those that are made after the age of 59 ½ , which do not incur a penalty.