"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."

Cgaros,

The fundamental difference here is while the overall market trend is up over time, the trend of individual stocks is not necessarily.

Buying good stocks and holding for total return only works if the stocks you hold go up over long periods of time.

GM is a good example.  At a 52 year low.

" I can realize these gains ANY DAY THAT I WANT TO "

 Yes, but not the same way.  You have to sell a little of everything you own, the up stocks and the down stocks, the winners and the losers. Your not selling  EXXON for a profit because you think it has run its course for a while like my manager did recently.  No you selling a little of EXXON and a little of everything else you own, irregardless of where it is in the gain /loss cycle.

Now is that really smart?  Are you really smarter than Wellington Management at 15 basis points per year?  Is selling a little of everything really smarter than trimming your winners while they are winners, before they revert to the mean?

In doing so, you are locking in some losses forever, giving up some future gains forever, and lowering your payout across the board forever.