If you get dividends after buying a fund, most investors have expectations. After all, dividends mean income, but in fact, fund dividends are not the same as we thought, because fund dividends can not bring substantial benefits to investors, so we should consider clearly which dividend method to choose.

What is the best way to choose fund dividends?

Mainly depends on which method is more suitable for investors. Direct cash dividends are exempt from personal income tax. Suitable for customers who are not optimistic about the market outlook or have short-term cash use needs. Dividend reinvestment is to convert cash dividends into fund shares and continue to hold funds. Suitable for value investors who have no cash demand in the short term and are optimistic about the market outlook during the adjustment period.

Before the fund pays dividends, investors can choose cash dividends or automatically convert cash dividends into fund shares for reinvestment. If they don't choose a fund, the default income distribution method is cash dividend.

In essence, the fund dividend is to distribute part of the fund income to the holders in advance in the form of cash dividend or dividend reinvestment. This part of the income is originally a part of the net value of the fund unit, and the fund assets remain unchanged before and after dividends.

Examples of cash bonuses:

Xiaoming holds 50 shares of a fund, and the latest unit net value is 2 yuan, so the assets are shown as 2*50= 100 yuan. One day, the fund company announced that it would pay dividends soon, and 10 was distributed to 5 yuan, that is, each share was distributed to 0.5 yuan. If the dividend distribution method set by Xiaoming is cash dividend, the dividend assets =0.5*50=25 yuan, and this 25 yuan directly enters Xiaoming's account. That is, the money that entered the account happened to be 25 yuan. After dividends, the unit net value of the fund =( 100-25)/50= 1.5 yuan, and the original 50 assets will be displayed as 1.5*50=75 yuan. Then the money with dividends into the account is 25 yuan +75 yuan, and the total amount of assets currently displayed by the fund is still 100.

Examples of dividend reinvestment:

Xiaoming holds 50 shares of a fund, and the latest unit net value is 2 yuan, so the assets are shown as 2*50= 100 yuan. One day, the fund company announced that it would pay dividends soon, and 10 was distributed to 5 yuan, that is, each share was distributed to 0.5 yuan. If Xiaoming sets the dividend distribution method as dividend reinvestment, the dividend assets =0.5*50=25 yuan, the net value of the fund unit after dividend distribution = total assets held by Xiaoming =66.67 * 1.5 yuan/= 100 yuan, and the total amount remains unchanged.

When the fund pays dividends, if you are optimistic about this fund, you will choose to reinvest in dividends. If you are not optimistic about this fund, you will choose cash dividends. The advantage of cash dividend is to take out some money in advance to avoid sleeping. The advantage of dividend reinvestment is that you will hold more shares after dividends, and the base of future asset appreciation will become larger.