Filed under: Getting Started, Mutual Funds
This is one of those areas that should be treated like poison. When a big, fat, juicy dividend yield is composed in whole or in part by what is termed a return of capital, you want to steer clear.
When a mutual fund or entity pays out a scheduled dividend payment that hasn't been earned by profits or interest income, you can bet that a portion of that dividend will be in the form of a return of capital, which simply means you as an investor are receiving some of your money back as part of the dividend.
Two negative things happen here.
Continue reading High-Yield Sin #3: Receiving a Return of Capital
High-Yield Sin #3: Receiving a Return of Capital originally appeared on BloggingStocks on Sat, 27 Feb 2010 15:00:00 EST. Please see our terms for use of feeds.
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