There are many benefits of a mutual fund’s structure such as better diversification,professional fund management and income is only taxed once, as it is paid to individual shareholders which means larger share in income. The mutual fund itself does not pay tax on the dividends it receives. This is in direct contrast to typical corporate earnings which are taxed twice, first as the company receives them, and again when individual shareholders receive dividends.There is less risk involved in this setting. Jump into the opportunity if you can because the rewards will be worth it in the end.Most mutual funds allow you to reinvest your dividends, and many investors choose to do so. When you have your dividends reinvested you’re treated the same as if you received the dividend in cash and then used that money to buy additional shares.

What are the costs involved in mutual funds besides the negative returns

Investors have to pay sales charges, annual fees, and other expenses and taxes, on any capital gains distribution they receive even if the fund didn’t performed well.Fee structure of a mf can be divided into two or three main components: management fee, non-management expense, and 12b-1/non-12b-1 fees plus brokerage commissions.
Fees and charges are an important consideration when choosing a mutual fund, because these costs lower your return. Many investors find it useful to compare the fees and costs of different mutual funds before they invest.A high cost Fund should perform better than a low-cost Fund.

You can try FINRA Fund Analyzer offers information and analysis on more than 18,000 mutual funds, Exchange traded funds (Encyclopaedia Britannica) and Exchange traded notes (ETNs). This tool estimates the value of the funds and the impact of the fees and costs of your investment and can you also the possibility of fees and available discounts for funds to search.

http://apps.finra.org/fundanalyzer/1/fa.aspx

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Dividends are taxed in most of the countries – it is a income in the hands of shareholders,which they receive for holding stocks of the company.People can get dividends for owning investments such as stocks, bonds and mutual funds .You can also receive dividends through a partnership, a property, a trust, a subchapter s corporation or an association that is taxable as a corporation. These payments can regularly scheduled or special dividends when paid if the company chooses.

There are two taxes which are paid on dividends these are corporate taxes furnished by corporates for distributing dividends and next is paid by individuals for the dividends they receive.

There are two types of dividends which are considered for taxation purposes

Ordinary and Qualified dividends
Ordinary dividends are the regular dividends which company distributes as a part of paid out of earnings and profits and are ordinary income to you.

While qualified dividends are ordinary dividends subject to the same 0% or 15% maximum tax rate that applies to net capital gain.There can be a significant difference between the way these are taxed as qualified dividends are taxed at capital gain rate which is 15% while ordinary can go much higher to 35%.

To qualify for the 0% or 15% maximum rate, all of the following requirements must be met.

First of all the dividends issued to you should be qualified ones.Here is the list of those dividends that are considered as non qualified

Then you must hold them till the period suggested by IRS,that is more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. For preferred stock, the holding period is 90 days during the 180-day period beginning 90 days before the stock’s ex-dividend date. The holding period includes the date of disposition, but not the acquisition date.

Dedicated Sources
http://www.irs.gov/publications/p550/ch01.html#en_US_2010_publink100010086
http://www.fool.com/personal-finance/taxes/2003/10/03/how-will-your-dividends-be-taxed.aspx

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