EARNINGS MAY BE DIVIDENDS OR CAPITAL GAINS

There are two basic ways to earn money from mutual funds—from dividends while you hold the funds, and from capital gains after you sell shares. To determine the total return on your mutual fund shares, you add the dividend yield to the change in net asset value. Capital gains you realize from selling or redeeming shares that have increased in value may be taxed at lower rates if you held the shares for over a year.

To learn about how your earnings are taxed, consult the tutorial on mutual fund taxation.