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In my previous question, I got replies which said that distributions and withdrawals are the same in terms of IRA.

More generally in investment, for an investment account, do they mean the same? My guess is they are not, because I have the following confusions

  • Is the action of a stock or mutual fund giving out dividend into the investment account (but the dividends are not taken out of the account) considered as distribution, but not as withdrawal?

  • Does withdrawal mean the action that the account holder takes money out of the investment account?

Thanks.

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A mutual fund makes distributions of its dividends and capital gains, usually once a year, or seminanually or quarterly or monthly etc; it does not distribute any capital losses to its shareholders but holds them for offsetting capital gains in future years, (cf, this answer of mine to a different question). A stock pays dividends; a stock neither has nor does it distribute capital gains: you get capital gains (or losses) when you sell the shares of the stock, but these are not called distributions of any kind. Similarly, you incur capital gains or losses when you redeem shares of mutual funds but these are not called distributions either. Note that non-ETF mutual fund shares are generally not bought and sold on stock exchanges; you buy shares directly from the fund and you sell shares back (redeem them) directly to the fund. All of the above transactions are taxable events for the year to you unless the shares are being held in a tax-deferred account or are tax-free for other reasons (e.g. dividends from a municipal bond fund).

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