I figured this was due to distribution but I’m still unclear on how this works. So the share price went down considerably but I’ll have more shares, so…it’s a wash? My Target Date funds are in 401(k) if this matters.
Thanks,
DangerDad
Yes, it's a wash. When a fund distributes the short term and long term capital gains it has earned during the year, as well as any regular dividend for the quarter or year, the value of the fund goes down by the same amount. You see this decrease in the form of a drop in the share price of the fund.
If you have your investment set to reinvest all distributions, then that happens and shows back up in the value of your account the following day usually.
In your case, since this is inside a 401k, you may not even notice it all happens if you don't check daily balances. Once it's all done, you will have more shares (due to the reinvestment), but they will each be worth less. But the total value of the investment will be the same (plus or minus any daily gains or losses due to the current day's market).
It matters a LOT more if the investment is NOT inside a 401k or IRA. Because, if the investment is in a taxable brokerage account, you would have to pay taxes on the distributions (even if they were reinvested). So while your fund would maintain it's overall value, you would have to pay taxes on the amount distributed -- costing you money for the year. This is why you often hear people say that fund distributions are not necessarily a good thing. Many prefer to be in investments that don't pay distributions. But inside a 401k, it doesn't matter.