In fact, it needs to be analyzed in detail.
Cash dividends, as the name implies, are distributed to investors in the form of cash.
Dividend reinvestment is paid in the form of new fund shares.
It should be noted that when we start to invest in a fund, it is impossible to choose the dividend method in advance. Only after the investment is successful can we find this fund among the funds we hold and set the dividend distribution method. Generally speaking, the fund's default dividend method is cash dividend. If you want to choose dividends for reinvestment, you must remember to modify the dividend method in time.
Here, I will focus on the difference between cash dividend and dividend reinvestment and the applicable situation.
In terms of liquidity, cash dividends can be realized, and the income can be seen, which can support more capital needs, or consider investing in other varieties. Dividend reinvestment exists in the form of new fund shares and continues to participate in the investment process. If you need funds, you need to redeem them first.
Judging from the compound interest effect, dividend reinvestment is easier to share the value-added benefits under the compound interest effect, which is an active and effective investment strategy for investors' spare money. After cash dividends, if investors do not have certain investment plans and arrangements in the short term, the cash dividends distributed may be idle.
How to choose cash dividend and dividend reinvestment?
If you are cautious about the market outlook, you may wish to choose cash dividends. The realized income can be diversified by investing in other varieties.
If you are optimistic about the market outlook or insist on long-term investment, you can consider reinvesting dividends, and the proceeds will become more fund shares to realize asset appreciation.