Many fund investors are very happy when they get the fund dividend for the first time, and feel as if they have made a windfall. However, when you carefully observe the fund's positions, you will find that this money is not an unexpected wealth, but it is still out of the fund's share. In fact, this is because many investors have not noticed the difference in the way of fund dividends. They can choose cash dividend or dividend reinvestment. Learn about the knowledge of fund dividends before making a decision.

0 1 investors who are more careful in the form of fund dividends will certainly find that fund dividends are actually part of the funds we hold in the form of cash returns to investors and will not bring additional income to investors. Fund dividends mainly include cash dividends and dividend reinvestment.

① Cash dividend

Cash dividend refers to the direct transfer of cash dividend to the account used by investors to purchase funds, which is equivalent to redemption of some fund shares we hold. The difference is that dividends do not require redemption fees, and fund dividends do not need to be taxed.

② Dividend reinvestment

Dividend reinvestment is actually redeeming fund shares into cash, but unlike cash dividends, it automatically reinvests cash into the fund instead of directly transferring cash to investors; And because it is dividend reinvestment, this reinvestment transaction does not require subscription fee.

For example, suppose I hold 10000 shares of a fund, and the net value of the fund on the day before dividends is 1.33, and each 10 fund announcement will be distributed according to 0.3 yuan, that is, 0.03 yuan per share, and the amount of the fund I hold before dividends is 13300 yuan.

If I choose cash dividends, I will get cash 300 yuan after dividends. After dividends, the net value is 1.3, and the holding amount is 13000 yuan, so the total is still 13300 yuan.

If I choose to reinvest in dividends, the net fund value will drop to 1.3 after dividends, but my share will increase by 300/ 1.3=230.77, with a total share of 10230.77, and the actual position amount is 13300 yuan.

Why should the fund pay dividends? As I have said before, fund dividends will not actually bring extra income to investors, so what is the significance of fund dividends? In fact, there are three main reasons for fund dividends:

① Avoid investment risks.

It is a common way for fund companies to avoid market risks through dividends, because when the market is overheated, investment opportunities decrease and investment risks increase. At this time, the fund company can help investors lock in the income through dividends, and at the same time, it can also reduce the position and avoid investment risks in this way.

② Reduce the net value of the fund.

Many novice investors always feel that the risk of high net worth/high stock price is relatively high when buying funds and stocks, and like to buy seemingly cheap ones, such as low-priced stocks and low-net-worth funds. Fund companies can reasonably reduce the net value of funds through dividends, which is really effective for some novice investors.

3 proof of excellent performance.

When it comes to dividends, all you can think of is that this company makes money. Although dividend itself can't bring extra income to investors, if the fund can continue to pay dividends, it also shows that the investment income of this fund is very good. After all, foundations with poor investment returns rarely pay dividends frequently. In addition, dividends are equivalent to advertising funds, which can attract new investors and make existing investors firmly hold them.

How to choose a dividend method In fact, when investing in a fund, there is no need to entangle the choice of dividend method, which can be judged by the following two aspects.

① Market conditions

If the market has gone for a long time and it is seriously overvalued, the better choice at this time is cash dividend, because when the market is overvalued, the investment risk is relatively high. Choosing cash dividends can reduce our positions and lock in some profits first; If the market is relatively stable, or the market has been underestimated, it is better to choose dividend reinvestment at this time.

② Self-investment planning

If the investment fund is for short-term investment, and the money needs to be used after a period of time, the more appropriate way is to choose cash dividends; If you plan to invest for a long time, the money has no other use in the short term, and you are ready to grow with the fund, you can choose the dividend reinvestment method.

To sum up, the choice of cash dividend or dividend reinvestment mainly depends on the market situation and the investor's personal investment plan. If the market is overvalued, then choose cash dividends, otherwise choose dividends for reinvestment; If the money may be used passively for a period of time, choose cash dividends. If it is a long-term investment, you can choose dividends to reinvest.