This is a difficult conversation because multiple people in it (Bill, Greg) simply do not understand how mutual fund shares work. When a fund pays you a CG distribution and you reinvest it, you don't have a greater income stream than you had before. You have exactly the same number of bonds and stock shares that you had before, setting aside daily market fluctuations. $10,000 invested with D&C or Wellington is $10,000, whether it's called 10 shares, 100 shares, or 1,000 shares.
If my buy-and-hold fund makes good investments and doesn't pay regular CG distributions, my per-share NAV will rise with any unrealized gains. I can realize these gains ANY DAY THAT I WANT TO - it doesn't matter when the managers decide to sell stocks or other shareholders redeem, forcing them to sell, because I can sell any time. At the same time, my dividend per share is likely to rise, because my managers are holding companies that are appreciating in value and likely raising their dividends. It doesn't matter that "you have more shares", because yours are paying the same dividend they've always paid, mine are paying a larger dividend on a greater NAV, and our income streams are the same.
CG distributions are a return of capital. I could make a fund that starts with $10 share NAV (you give me 10, I give you 1 share). Each year I buy a random assortment of volatile stocks with an overall total return of 0% (i.e. I am the worst mutual fund manger ever). Each year I sell the ones that have gone up, hold the ones that have gone down, and give you a $1 capital gains distribution. You can take these distributions as cash, but after a few years the NAV will be way down and I will no longer be able to make significant gains or distributions - you will have traded your money for a phony income stream that disappeared, perhaps at a loss after considering my expenses. On the other hand, you could reinvest your distributions, but at the end of the day you're still going to have your $10 invested with me, you will have gained no return, and you'll have a huge tax bill. My high CG distributions were no indication of a successful fund and provided no benefit to you.
In spite of all this, the funds in the post (DODBX and other similar) remain good funds. Good funds will pay CG distributions just like my imaginary fund. The difference is that they will have a good total return as well. The CG distribution itself is nothing to be excited about, because it only represents a realization/return of profits that were already reflected in the NAV increase.
