A mutual fund dividend, or distribution, may be physically paid directly to the investor, or it may be reinvested in the fund, giving the investor more shares. Also see dividend. Diversification refers to the numbers of securities held and their types. In addition, the concept of diversification extends beyond the confines of a single type of investment. For example, there is more diversification in a stock and bond portfolio than in a portfolio constructed entirely of stocks alone.
Dividends are payments made by corporations on earnings.
In other words, part of the profits and income are shared with investors. This applies to mutual funds as well as shares of companies. An economic term refering to the savings companies may experience when they grow. For example, it may be less expensive per-employee to produce payroll for 10 employees than for one. The underlying value of an investment is the expected growth.