He's already asked me for money to help him start his latest venture: A cheese-sculpting business. Just to confirm, I did a quick search on ICENX and found that they did indeed pay a dividend yesterday.My son, Win, is a budding entrepreneur. You should see the dividend transaction listed somewhere in your account. Your market value is above what you originally invested, so there was probably also a bit of a price increase for the day. In your example, notice that you now have more shares than you originally purchased, but that the price dropped significantly. You would now have 125 units $8/unit = $1000 invested. Assuming you chose to reinvest your dividends, you would automatically purchase another $200 worth of units at the new price (so 25 more units). Ignoring the daily price fluctuations, if the fund paid out a 20% dividend, you would get $200 and the unit price would drop to $8/unit. Assume you invested $1000 and bought 100 units at $10/unit. Here's a simplified example of how it works. This happens with many funds, especially as we come to the end of the year.
It is very likely that the fund paid out a dividend in the form of reinvested shares. See also my answer to this recent question about investing in mutual funds.
Shares and wouldn't have owed tax on that distribution that you just boughtīy making the investment just before the distribution was made. Had made its distribution, you could have bought $1000/14.11 = 70.871 Late in the year? If you had waited till after the mutual fund Why the mutual fund companies recommend against making new investments You owe income tax on that $216 dividend that you received.
Is now worth $1012 only, and so you have actually lost money.
The account is the original $1000 plus the amount of the distribution Of your investment is $1012, but the amount that you have invested in The fundĭistributed its earnings shortly thereafter and gave you 71.333-56= 15.333Īdditional shares. You boughtĥ6 shares at a price of $17.857 per share (net cost $1000). Inside a 401k or IRA or other tax-deferred investment program). Regardless of whether you take the distributions as cash or re-invest in theįund, that money is taxable income to you (unless the fund is owned The price of the actual stocks held by the fund. Total value of your account is the same (ignoring normal market fluctuations in You own more shares at a lower price than the day before when the price was higher but the For those who choose to reinvest, the number of shares in the mutualįund increases, but since the price of the shares has decreased, the net amount Option (it is often the default choice if you ignored all this because you areĪ newbie). In cash or can be re-invested in the fund you most likely chose the latter In the amount of the per share distribution. To their shareholders in December, and the share price of the funds goes down Most mutual fund companies have educational materials on their sites that recommend against making new investments in mutual funds in the last two months of the yearīecause most mutual funds distribute their earnings (dividends, capital gains etc) You did something that you shouldn't have done you bought a dividend.