Keep in mind, however, that the share price will reflect financial market developments and may be higher or lower than the price originally paid. Services vary among mutual fund companies, but the larger ones provide a broad array that makes investing basically hassle free. If the overall value of the securities in a fund increases, so does the price of each of your fund shares. Of course, there is no guarantee the price will rise. If it falls, you may lose money on your fund investment.
Mutual funds pay out net income earned on the securities in the portfolio.
Most bond and money funds pay dividends monthly, while stock funds make quarterly or annual income distributions. If you reinvest all or a portion of these distributions in additional fund shares, in effect earning income on income, the income stream will grow at a compound rate. Capital gain distributions. If profits from sales of fund securities during a year exceed losses from such sales, the fund will pay shareholders the resulting net capital gains once or sometimes twice a year. As with income dividends, reinvesting these distributions can help your account grow faster.