When you open a mutual fund account, you can choose to have your earnings and capital gain distributions paid to you or reinvested in your fund.
While some people — retired people in particular — use the distributions to supplement their income, many others reinvest. That means buying additional shares in the fund with every distribution, either monthly or annually, depending on the fund. Since you can buy fractional shares in most funds, all of your distribution is reinvested right away.
The reimbursed amounts are shown on your monthly account statement as well as in year-end statements, since these amounts are usually taxable. Like DRIP purchases, each reinvestment is a separate transaction.
