According to the Interim Measures for the Management of Securities Investment Funds, fund management must allocate at least 90% of the net income of the fund in cash at least once a year. The amount and strategy of fund dividends are often implemented according to the provisions of the fund contract. The default dividend method of open-end funds is cash dividend, but the basic people can change it independently according to the individual's specific situation and the changes in the fund market.

Different dividend distribution methods

According to the different types of funds, there are three types of income distribution (dividends) of funds.

The income distribution of closed-end funds shall not be less than once a year. The annual income distribution ratio of closed-end funds shall not be less than 90% of the realized income of the fund year. The income of closed-end funds in the current year should first make up for the losses of the previous year, and the losses incurred in that year should not be distributed. Closed-end funds generally use cash dividends.

The fund contract of an open-end fund shall stipulate the maximum number of fund income distribution and the minimum proportion of fund distribution each year. Many open-end funds require distribution at least once a year. Similarly, the income of the open-end fund in the current year should make up for the loss of the previous year, and the loss in that year will not be distributed. There are two ways to pay dividends: cash dividends and dividend reinvestment. If there is no special provision in the fund contract, you can choose the dividend method at the time of purchase. If you don't choose, it will generally default to cash dividends.

Money market funds can stipulate in the fund contract that the income distribution method is dividend reinvestment, and stipulate in the fund contract whether the income is carried forward daily or monthly. Monetary funds purchased on the same day shall enjoy the right to distribute fund income from the next working day.

Dividend reinvestment dividend

Investors do not have to pay subscription fees for the fund shares reinvested in dividends.

Cash dividends and dividend reinvestment

There are two ways of fund dividend: cash dividend and dividend reinvestment. Either way, the dividends you get from investing in the fund are exempt from income tax.

Cash dividend: you can get the dividend cash directly without paying redemption fee, that is, you can put it in your bag. If your investment period is not long and the current market environment is relatively volatile, I suggest you choose the cash dividend method.

Dividend reinvestment: reinvesting cash dividends in the fund, commonly known as "accumulated interest", can not only avoid the subscription cost of reinvestment, but also enjoy the next dividend of the fund share obtained by reinvestment. If your investment period is long, I suggest you choose dividend conversion.

Fund dividend means that the fund distributes its net investment income to fund holders. The net income of the fund refers to the balance of the fund income after deducting the expenses that can be deducted from the fund income according to the relevant regulations, including dividends, bonuses, bond interest, price difference between buying and selling securities, bank deposit interest and other income. There are two ways of fund dividend: cash dividend and dividend reinvestment.