How does a capital gain distribution impact the share price of a mutual fund?
The capital gains earned in a mutual fund accumulate and help raise the share price of the mutual fund. When the capital gains are realized and paid out of the mutual fund to a shareholder, the fund’s share price, or net asset value (NAV), is reduced by the amount of the capital gain distribution. Example: If a fund has an NAV of $20 per share and makes a capital gain distribution of $2 per share at the end of the year, the NAV will be reduced by the $2 paid to shareholders on a specified payment date. On that payment date, the fund’s share price will be reduced to $18.
