Equity funds mainly invest in stocks. After buying and selling stocks to earn money, if you feel that there are no good investment opportunities for the time being, you will distribute the earned money to investors in the form of dividends, which is the main source of dividends for active funds. Therefore, in the bull market, active funds often have a large proportion of dividends.
Unlike stock funds, the positions of index funds need to be adjusted with the adjustment of index constituent stocks. The frequency of position adjustment is relatively low, and the main source of dividend of index funds is the annual dividend of constituent stock companies. Therefore, even in a bear market, as long as the company's profits are normal and the dividend policy is normal, index funds will still get dividends, thus giving dividends to investors.
Index funds do not get dividends from listed companies immediately, but pay dividends regularly after accumulating to a certain extent.
The purpose of index funds is to track indexes. When the accumulated bonus is too much, the tracking effect will be affected. Therefore, at an appropriate time, the fund manager must distribute these cash to our investors in the form of dividends.
At the same time, index funds must meet certain conditions to pay dividends. For example, index funds have completed the basic task of "tracking the index". Under normal circumstances, index funds are required to have a net growth rate of more than 1% in the same period before they can pay dividends.
The dividend-paying ability of index funds can be judged by the dividend yield of the index. The higher the dividend yield, the stronger the dividend-paying ability of index funds, and the lower the index valuation, the greater the investment value of index funds.