Targeted-Distribution Fund

AAA

DEFINITION of 'Targeted-Distribution Fund'

A mutual fund that focuses on the distribution of income and capital gains to fund holders. These funds are becoming more popular as our population ages because they are aimed at income replacement, something that is crucial as traditional employer-sponsored pension plans disappear.

Also known as "Open-End Managed-Payout Funds."

INVESTOPEDIA EXPLAINS 'Targeted-Distribution Fund'

Different features are offered depending on the structure of the fund. Some funds specify a specific monthly payout, while for others the payment is variable and based on portfolio performance. Some funds will deplete the investors principle, while others will maintain it.

No matter the structure of the fund, it is very important to note that the payments and principle depletion or retention is not contracted - unlike annuities. Although the fund may plan to have a specific inflation-adjusted payout and principle retention strategy, if portfolio performance does not allow for it, there is no obligation by the fund managers to adhere.

RELATED TERMS
  1. Target-Date Fund

    A mutual fund in the hybrid category that automatically resets ...
  2. Open-End Fund

    A type of mutual fund that does not have restrictions on the ...
  3. Distribution

    1. When trading volume is higher than that of the previous day ...
  4. Open-End Management Company

    A company that distributes and redeems securities it issues. ...
  5. Mutual Fund Custodian

    A trust company, bank or similar financial institution responsible ...
  6. Life-Cycle Fund

    A special category of balanced, or asset-allocation, mutual fund ...
Related Articles
  1. 4 Strategies For Managing A Portfolio ...
    Mutual Funds & ETFs

    4 Strategies For Managing A Portfolio ...

  2. Introduction To Investment Diversification
    Investing Basics

    Introduction To Investment Diversification

  3. Closing Mutual Funds: Investment Protection ...
    Mutual Funds & ETFs

    Closing Mutual Funds: Investment Protection ...

  4. An Introduction To Closed-End Mutual ...
    Mutual Funds & ETFs

    An Introduction To Closed-End Mutual ...

comments powered by Disqus
Hot Definitions
  1. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  2. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  3. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  4. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  5. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  6. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
Trading Center