reinvesting capital gains for mutual fund?

Question

im about to purchase mutual funds in my self directed merryl account and theres 3 options for new orders which are reinvesting capital gain, reinvesting capital gains and dividends, and not reinvesting....im not sure what that means and what option i should pick

Answer 1

Well, you hope that the account is going to make money. That money is in the form of dividends or capital gains. When you reinvest that money, it goes back to the fund and buys more shares of the fund. Whether or not you want to do that depends on your financial situation. If you reinvest the money, it should help your account grow faster (provided the fund is making money if the first place). However if you're investing money to get a little extra pocket money, then you don't want to reinvest the gains in the account, you can have them sent to you.

Answer 2

In a cash account ( not tax deferred) - Yes. Gains or losses realized at time of sale.