Dividend mutual funds work by allowing you as an individual investor to pool your money with other investors. This process makes it easier for individuals to access professional money management services without the millions of dollars often required to hire a personal financial manager. When you purchase shares of a mutual fund, you receive partial ownership in all the assets that make up the fund.
Dividend mutual funds pay out regular dividends on a schedule set by the fund managers based on your individual total investment in the fund. These funds focus on identifying and investing in companies that pay high dividends. You’ll see these dividends held in cash or reinvested in your portfolio depending on your preferences when they are paid out.