Question by samhandwich22: Regarding investing in a roth IRA- what is a dividend? what is a capital gains distribution?
I opened a roth IRA via sharebuileder. I am trying to invest in a mutual fund and as a 23 year old, I am very unexperienced in this area (they dont teach you these things in college!).
It is asking me if i wanted to reinvest dividends and also asking me if i want to reinvest capital gains distributions? I dont know what either of these mean. Whats the best way for me to get the most money out of my roth IRA?
Best answer:
Answer by William
Yes, you want to reinvestment them. Dividend and capital gains distributions are paid by the specific mutual fund. Reinvesting them means that they are automatically used to purchase additional fund shares – sort of like compounding of interest on a savings account.
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