What is a dividend index fund?
First of all, we need to know what an index fund is. An index fund tracks a specific market index and constructs its investment portfolio according to the constituent stocks of the index, so that the fund's income is roughly the same as that of the market index. As one of the index funds, the dividend index fund chooses to track the dividend index, mainly investing in stocks with high dividend yield and stable dividends, and is a fund that takes into account dividend income and capital appreciation. Generally speaking, its fund performance is relatively good because of its strong dividend-paying ability, relatively stable dividend-paying and high cash dividend-paying rate. In the A-share market, there are mainly four dividend index funds: SSE dividend index fund, Shenzhen dividend index fund, CSI dividend index fund and S&P A-share dividend opportunity index fund.
What are the advantages and disadvantages?
Advantages of dividend index fund:
1, the investment risk is lower than other equity funds. These stocks invested by dividend index funds have low valuations and good company performance, so the risks faced by the funds are also small.
2. The net fund value is more stable than other equity funds. The reason why these stocks invested by dividend index funds can have stable high dividends is because the listed companies corresponding to the stocks can make stable profits, so the fund's net value growth is more stable.
3. Fund income is more stable. Dividend index funds mainly invest in stocks with stable and high dividends. Even if the share price of these companies rises slowly, they can get a lot of dividend income.
Disadvantages of dividend index funds:
When the stock market is good, its income growth is slower than other types of funds. Because dividend index funds tend to invest in stocks with stable dividends and high dividend yield, the listed companies corresponding to these stocks have often entered a mature stage and are unlikely to grow in the future. When the market is good, the share price of these stocks will rise more slowly than other growth stocks, so the dividend index fund will earn less at this time.