A lot depends on the fund's long-term history, as well as on how long you've been a shareholder. Say you're a small-stock investor. If your fund is an average performer, it's down 17 percent for the year. Nonetheless, it may have sizable gains in individual stocks, some logged over several years. That would account for the 63 percent return the average small-stock fund has generated over the past five years, and if you've been a shareholder all along, you might not mind that your fund has decided to realize some of those capital gains and distribute them, as funds are required to do.
Managers realize gains all the time, of course, in managing portfolios.
But selling has intensified this year, especially amid volatility like last week's. Some managers rushed to lock in gains before they evaporated in the summer downturn. Some may have sold stocks to meet real or anticipated redemptions. Other fund managers have cashed in holdings this year to shop for newly created bargains. Timing is all.