Capital gains distribution

A payment of gains the fund realised through its own trading, passed through to holders, in systems that require the fund to distribute rather than retain them.

Example

A distribution of 2.05 on a 50.00 unit drops the unit to 47.95 and pays 2.05 in cash - the holder is no richer, and at an illustrative 20% rate owes 0.82% of the position.

Important

It is created by the fund's trading, not by yours, and it can arrive on a position bought weeks earlier that shows no gain. Check the distribution calendar before buying outside a sheltered account.

Related terms

• Distribution — Cash returned to investors by a fund, typically after an underlying holding is sold or produces income.
• Taxable event — The moment a tax system treats something as having happened - most commonly a sale, rather than an increase in value while you still hold the asset.
• Tax wrapper — An account or structure that changes how the assets inside it are taxed, without changing the assets themselves.
• Portfolio turnover — The proportion of a portfolio bought and sold within a year. Zero means nothing was sold; one means roughly the whole portfolio changed hands.

Lessons that explain it

• The cost you can read, the costs you cannot, and the tax bill you did not choose — Four layers of cost sit behind one printed number, and a fund's own trading can hand you a taxable event on a position showing no gain at all. (13 min)

All 578 terms in the Investing glossary