Dividends from index funds are the same as those from stocks. Before and after dividends, the total value held by investors will not change, the fund share will increase, and the fund net value will decrease to the corresponding value.
Net fund value refers to the total net assets of the current fund divided by the total share of the fund. The net assets of the fund will increase after the dividends of the constituent stock enterprises, so the net value of the fund will also increase. When dividends are distributed to investors in cash, the net assets of the fund will decrease and the net value of the fund will also decrease.
So fundamentally speaking, index funds pay dividends, so investors will not make money. In this case, why should index funds pay dividends?
After dividends are distributed by constituent stock companies, the proportion of cash in the fund's net assets will increase, the stock position will be forced to decrease, and the effect of index fund tracking index will become worse. Through dividends, this part of the cash can be transferred to investors, so that index funds can better track the index and reduce the tracking error.
For the basic people, dividends can get cash flow. Of course, we can also choose to put cash into the bag after dividends, or we can choose to reinvest dividends and get fund shares through dividend reinvestment.
It should be noted that under normal circumstances, the default dividend payment method of trading platform is cash dividend payment. If you want to choose dividend reinvestment, investors need to modify it manually.