There are generally two options for fund dividends: cash dividends or dividend reinvestment. So which one suits you best?
Fund dividends are generally distributed to investors in cash by default. If investors take cash directly, "leaving the bag for safety" means choosing cash dividend; If investors continue to use this cash to buy funds, they will choose the dividend reinvestment dividend method. Like a chicken laying eggs. You can choose to eat eggs, or you can wait for the eggs to hatch.
There are three main differences between cash dividends and dividend reinvestment:
First of all, future income is different. Dividend reinvestment continues to invest in dividends, compound interest and increase value, and the income focuses on the future, just like eggs incubating chickens, thus regenerating more eggs; Moreover, cash dividend is a simple appreciation, and the income is certain, just like taking eggs directly.
Second, the risks are different. The income from cash dividends is a part of cash allocation, which is relatively safe, just like eggs will not run away with long legs. However, dividend reinvestment needs to bear investment risks, because it continues to invest in the market, just as eggs may not hatch chickens.
Finally, the cost is different. Dividend reinvestment is free of subscription fee, just like hens directly hatch chickens; If you continue to invest cash dividends in other wealth management products, you may need to pay a certain fee, just like selling eggs to buy a chicken, you need to pay a certain reward to the middleman.
So should we take the eggs or keep the chickens? To answer some questions, ask yourself what kind of investor you are.
Question 1: What kind of expected income do I need to achieve?
Cash dividends are suitable for investors who are optimistic about short-term returns, and the compound interest effect of dividend reinvestment is in line with the investment characteristics of long-term investors. Take a fund as an example. From its establishment to June 24, 2006, the total return rate of investors who choose cash dividend is 78.4 1%, while the total return rate of investors who choose dividend reinvestment is 83.80%, which is 5.39% higher than the former. Therefore, if you want to get the maximum benefit with limited funds, reinvestment is of course the first choice.
Question 2: Do I have the energy to manage my investment?
For investors who don't have the energy to manage their own investments, dividend reinvestment is a more appropriate way to pay dividends.
Question 3: Does the fund I invested satisfy me?
If the dividend-paying fund is in line with investors' expectations, as long as the fund continues to maintain its consistent investment style and investment philosophy, its historical performance can be used as a reference for future performance, and reinvesting with dividends can make investors' income step by step.
Question 4: Is the current market a bear market or a bull market?
In a bear market, risk is the first consideration. Cash dividends can lock in profits and control risks. In the bull market, instead of turning dividends into cash and sleeping in the bank, it is better to reinvest dividends, which can achieve the purpose of value-added on the one hand and save the cost of reinvestment on the other.
There is no specific settlement time, only the fund announces dividends on a certain day of a certain year. People who hold the fund on this day, even if they bought it yesterday, can also participate in dividends. The dividend method is set when buying the fund. If the customer has no special statement, the system will default to cash dividend. In the process of fund holding, you can modify the dividend distribution method many times, but the last time before dividend distribution shall prevail.