Investing or doing business in life, once there is a dividend, it means that participants can make money, so many investors are particularly excited to see the fund dividend. After participating in the dividend, they found that their principal was less. What's going on here?

Why is the principal less after the fund pays dividends?

Fund dividends are part of the fund's income, so the net value drops after dividends, and investors will find that their principal is less. The cash generated by the cash dividend in the fund dividend will return to the investor's bank card, which is equivalent to reducing the investment principal.

For example, Xiao Li has a fund with 1 1,000 copies, and the current net value is 1 yuan, so the value of holding the fund is 1 1,000 yuan. The fund company announced dividends, and each dividend went to 0.2 yuan. After dividends, the net value of the fund unit decreased to 0.8 yuan (1-0.2). At present, the value of funds held by Xiao Li is 800 yuan (0.8* 1000) and 200 yuan (0.2* 1000), which add up to the original 1000, but only 800 yuan holds the principal.

Fund dividends can be divided into two ways: cash dividends and dividend reinvestment. Cash dividend means that the fund company distributes part of the fund income to fund investors in cash, and dividend reinvestment means that the cash obtained from dividend is converted into fund shares according to the net value of the fund and distributed to investors, who can choose which method before dividend.

Fund dividends are not extra money for investors, which is equivalent to giving money from the left hand to the right hand. The total assets have not changed, so don't think that a fund with dividends is a good fund.