Investing term

What is Distribution?

The income a fund pays out to its shareholders — dividends from stocks held, plus realized capital gains.

A distribution is the income a fund pays out to its shareholders — the dividends and interest collected from its holdings, plus any realized capital gains, passed through to you. Funds are generally required to distribute this income periodically. You can take it as cash or reinvest it, but either way it's usually a taxable event in a standard account.

For example

An index fund collects dividends from the 500 companies it holds and passes them to you as a quarterly distribution — your share of all that underlying income.

Distribution is taught hands-on in Stage 6 — Index Funds, ETFs & Mutual Funds.

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Related terms

Active fundA fund whose manager picks stocks in the hope of beating a benchmark.BenchmarkThe reference index a fund compares itself to — e.g. the S&P 500, MSCI World, or Bloomberg Aggregate.Creation/redemptionThe mechanism that keeps ETF prices close to NAV. Authorized participants swap baskets of underlying stocks for ETF shares (or vice versa).ETFExchange-Traded Fund — a basket of many stocks (or bonds) bundled into a single share that trades on an exchange like a regular stock.
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