What does a mutual fund's 'distribution' refer to?

A mutual fund's 'distribution' refers specifically to the payments made to investors from the fund's income and capital gains. When a mutual fund generates income through dividends, interest, or realized capital gains, it may decide to distribute a portion of that income to its investors. These distributions can be in the form of cash payments or additional shares, depending on the preference of the investor and the policies of the fund.

Mutual funds typically make distributions on a regular basis, such as monthly, quarterly, or annually, and these distributions provide a source of income for investors. Understanding this concept is crucial for investors who rely on mutual funds for income, as it affects their overall return on investment and tax obligations.

The other options do not accurately represent the term 'distribution' within the context of mutual funds. The total number of shares sold in a year refers to sales activity, fees relate to the cost of investing in the fund, and reinvestment of profits indicates a different process where the returns are not distributed to investors but instead are used to purchase more shares, which can lead to growth rather than immediate income.