Payments to a fund's shareholders that result from the sale of securities in the fund's portfolio are

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Payments to a fund's shareholders that result from the sale of securities in the fund's portfolio are capital gain distributions. This is because mutual funds are required by law to distribute any net capital gains to shareholders at least once a year. These capital gains can result from the sale of securities within the fund's portfolio, and are typically classified as short-term or long-term depending on the holding period of the securities. Income dividends, on the other hand, are payments made by a fund's portfolio of income-generating securities, such as stocks and bonds.

Payments to a Fund's Shareholders That Result from the Sale