Mutual funds sold in the United States are required to pay out all capital gains at least once per year. For investors in taxable accounts, this is worth noting, as the payouts can trigger tax liability.

Open-ended funds, on the other hand, pay out dividends and capital gains each year to all shareholders, regardless of the date on which the shareholder bought into the fund. This can result, for example, in an investor buying into a fund in November, but owing capital gains tax on gains that were realized in March. Even though the investor didn't own the fund in March, tax liability is shared among all investors on a yearly basis.

For investors in 401(k) and other tax-deferred retirement savings vehicles, taxes are paid only when the investments are redeemed, making the yearly payout of capital gains an issue of little concern.

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