Final answer:
The Ex-dividend Date is when mutual fund shares can be traded without the right to receive the most recently declared dividend. Buying shares before this date entitles the investor to the dividend after the date does not. It is one aspect of shareholder return, in addition to capital gains.
Step-by-step explanation:
The Ex-dividend Date is the date on which a mutual fund's shares can be bought or sold without including the dividend. This means that if investors purchase the shares on or after the ex-dividend date, they are not entitled to receive the most recently declared dividend.
Conversely, if shares are purchased before the ex-dividend date, investors are eligible to receive the dividend. Mutual funds allow investors to diversify their portfolios with less risk because they invest in a range of stocks or bonds from a variety of companies, ensuring that an individual's investment is not tied to the performance of a single entity.
Investors in mutual funds, as well as stocks of public companies, typically seek a return on investment in two forms: dividends or capital gains, which is the increase in the value of an investment between the time it is bought and when it is sold.