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Absolutely correct. When dividends are reinvested, you are actually buying additional shares of the fund at new prices and with new holding periods. The only way around this would be to elect to be PAID the dividends, rather than reinvesting them.

Thanks ...I think I am finally starting to understand all this ...another point...if I have the dividends paid to me directly, I will still eventually have to pay ordinary dividend interest on this money at tax time, correct? So either way does it really matter which way I do it?

Also....Besides the obvious reasons why people buy mutual funds(having other people handle your money) why would someone want to pay cap gains taxes every year thru the fund and then again when we sell the shares of the fund? Aren't we actually being taxed twice on the same money or am i missing something?............thanks for your time...Debbie
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