Let's first look at the circumstances under which the fund will pay dividends.
First, the fund's income in the current year can make up for the losses in previous years before it can pay dividends;
Second, after the fund pays dividends, the net value of the fund unit cannot be lower than the face value;
Third, if the fund has a net loss at present, it cannot pay dividends.
Fund dividends must meet the above three conditions before they can be distributed. Generally speaking, normal dividends can show that the fund is running well.
When the fund pays dividends, we can choose two ways to distribute the dividends. The first way is to reinvest dividends, that is, to automatically purchase dividends; The second is cash dividend, that is, take out the dividend funds and put them in a bag.
Many people think that dividends sound like a good thing and seem to be very cost-effective. In fact, the fund dividend is not as good as you think, because the dividend money is not given to you by the fund company for no reason, but to yourself. Fund dividends are eligible funds. Part of the total investment of the Fund is converted into cash and distributed to the original holders of the Fund. After dividends, the net value of the fund will decline. The reduced amount is the dividend amount allocated to you. The more dividends, the more the net value drops. So for investors, the total amount of funds you hold, that is, your assets, has not changed before and after dividends.
Let's go back to the way of choosing dividends.
Dividend reinvestment is to increase the holding share of the original fund and keep rolling. Generally, the subscription fee is no longer charged for the dividend reinvestment part. If you are optimistic about this fund, you should choose the way of dividend reinvestment. The cash dividend you choose is basically equivalent to manually redeeming some funds. If you need to make strategic adjustments to collect cash, you can choose the way of cash dividend.
Many people like to equate the way of choosing cash dividends with investment safety, especially when the market fluctuates, when the market drops, and when the market rises, they expect to re-enter. Isn't this a band operation? Not to mention the risk of band operation, which is contrary to the concept of long-term income of fund investment. What's more, it's time for you to achieve your investment goal and really quit the market. As long as you quit and enter the market, your risk will come back.
The dividend payment method is not chosen when the fund is facing dividends, but when you apply for this fund at the beginning. You can pay attention to the confirmation information when purchasing funds. According to your own needs, fund companies generally encourage investors to continue investing, so the default dividend reinvestment method allows investors to change the dividend method at any time.
Dividend is not a particularly important issue in fund investment. For long-term investors, dividend reinvestment is undoubtedly a better choice.