I think it refers to how things are taxed. Bonds are taxed at marginal tax rates while capital gains are taxed at 50% that.

 

Thanks for responding. Still a bit fuzzy but getting there.

 

The first two funds will likely produce Other Income since ex-Canada dividends are not eligible for the Canadian dividend tax credit. They could also deliver Return of Capital and/or Cap Gains. This will show up on the tax slips each March.

The third fund could have a variety of income, including eligbile dividends, interest from Cdn sources, cap gains and return of capital.

The fourth fund will deliver mostly interest, but could also produce return of capital and/or cap gains.

The proportions of which can vary some from year to year depending on markets and what the fund manager buys and sells within the fund during the year

You can find historical distribution allocations online. A chart for tax year 2014 as an example. https://www.tdassetmanagement.com/F...nd-Document/pdf/Distributions/TD-Mutual-Funds/2014 Distribution Summary ENG.pdf

 

Thanks for the response and the explanations, AltaRed. I still feel that the line between which funds are interest-bearing versus growth generating is not very clear cut but your explanation helped a lot in my understanding.
I tried to access the link that you provided for the historical distributions but it didn’t work so I am trying to find it on my own.

Thanks again.

 

It is true the first 3 funds, being equity funds, will provide growth over time. That will/should result in cap gains when you sell them as compared to the bond fund which will likely generate more interest income than cap gains (or losses). That is at a macro level.

My comments were more focused on what the annual distributions may look like, so that you are not surprised what the T3 tax slips look like each year. The link continues to work fine for me....

 

Thanks for the further explanations "at the macro level," which seems to be where my level of understanding is for now.
I tried the link again and it does work.