The best choice for dividends is reinvestment

Fund investors can choose two dividend methods, one is cash dividend, the other is dividend reinvestment. Many investors like cash dividends because of the psychological factors of being safe.

So, is cash dividend good or dividend reinvestment good? In fact, in order to reduce transaction costs and improve fund returns, investors had better choose dividend reinvestment.

The so-called dividend reinvestment is that the dividend obtained from the fund dividend is directly used to purchase the fund according to the net value of the equity registration date. Financial experts will be this way of dividend, figuratively compared to "chicken egg, egg chicken". From the return rate of long-term investment, choosing the dividend reinvestment method can get more expected returns.

Take the purchase of ICBC Credit Suisse core value fund with the principal of 10000 yuan as an example. As of June 20, 2007, the accumulated net value of the fund is 3.6087 yuan. Since the establishment of the fund on August 31, 2005, the accumulated dividend is 4 yuan per 10 shares, and the unit net value in June 2007 is 3.2087 yuan. Assuming that investors have subscribed and held the fund since its establishment, and always choose cash dividends, they can get 31610.45 yuan by redemption on June 20, 2007, with 3960.4 yuan of dividend income and 25570.85 yuan of final investment profit; if they always choose dividend reinvestment and redeem at the same time, they can get 39240.23 yuan and 29240.23 yuan of investment profit. In less than two years, choosing cash dividend is 36.69% less than choosing dividend reinvestment (assuming subscription and redemption rates are 1% and 0.5%).

In fact, this is the charm of compound interest investment of "rolling interest". For long-term investors, the longer the investment time is, the greater the dividend frequency is, the more obvious the advantage of dividend reinvestment is. In addition, in order to encourage everyone to continue to invest, fund companies do not charge subscription fees for dividend reinvestment, and the dividend will be converted into fund shares according to the net value of each unit of fund on the dividend distribution date, and added to the investor's account. This method can not only save the purchase cost of reinvestment, but also improve the actual income of fund investment.