Consider the other investments you have. Know the fund's performance. Read other financial information about funds you are considering. Three Ways You Can Make Money on Mutual Funds Dividends and Interest. A fund may receive income in the form of dividends and interests on the securities it owns.
Bonds pay interest, and some stocks pay dividends.
The mutual fund company will pass this income on to its shareholders. You generally will be taxed yearly on this amount unless the fund holds tax-free securities. Prices of the securities in a fund may increase. When the fund then sells the security, the fund has a capital gain. These capital gains will be taxed each year they are received.