Almost every fund has an annual fee. You can choose to have your money automatically reinvested, you can have a check sent to you, or you can have it deposited into an account. Dividends, Capital Gains, and Increasing Share Values. When a company in which the fund has shares issues dividends, you receive a proportionate amount based on the amount of your investment. You can decide whether to reinvest your dividends in additional mutual fund shares or be paid outright.
All bonds pay interest.
When a bond which the fund owns pays interest, you receive a proportionate amount of this interest. It is paid to you as fund dividends- either in cash or reinvested in your account. The fund balances these gains against capital losses and pays you a capital gains distribution. Few bonds have capital gains associated with them, so income from this source is limited with a bond fund. As the value of the assets it holds increases, the value of the fund itself increases.