When it comes to dividends, everyone may think that they have given away a sum of money for nothing, so many people think that it is good to pay dividends when they are making investments, and the more dividends, the better, and they can earn an extra amount through dividends.
Is that really the case? Today we are going to talk about those things about dividends, what is dividends? **Why does the net value decrease after the dividend?
What is a dividend
Dividends refer to the net income obtained by the company from distributing a part of the net income to investors, and the funds from the dividends are obtained from the investment. To put it simply, a part of the net income is distributed to investors in the form of cash or shares, and dividends will not increase income or affect income.
As a small example, if Nannan has a **1000 shares in his hand, the current net value is 14 yuan, then the total asset value of Nannan's ** is 1400 yuan, if this ** wants to pay dividends, each share dividends 01 yuan, then the dividend amount is 100 yuan, and the net value of ** after the dividend is 1$3. Therefore, the dividend is to split the original ** value of 1400 yuan into 1300 yuan ** and 100 yuan dividends, and the people do not get additional income.
In other words, the income of the dividend is part of the original net value of the unit, so the net value will decline after the dividend, but the total assets held by investors before and after the dividend are unchanged.
Choice of dividend method
So after dividends, where does the money from the reduction in net worth go? It depends on the type of dividend we choose, i.e. cash dividends or dividend reinvestment.
Cash dividendsIt is directly distributed to investors in the form of cash, free of redemption fees, which is more suitable for investors who have short-term capital use needs or want to settle in their pockets early.
Dividends are reinvested, is to convert the income of the distribution into this ** share to distribute to investors, free of subscription fees, more suitable for optimistic about the market outlook, or investors who want to hold it for a long time.
Under the reminder of Nannan here, under normal circumstances, in addition to currency**, the general open** defaults to cash dividends. If investors want to use the dividend reinvestment method, remember to modify it before the record date of the dividend interest.
The meaning of dividends
Do you want to ask here: since the ** dividend will not increase income, then why do you need to pay dividends? What is the significance of dividends? The main points are as follows:
First, save transaction costs。For investors, cash dividends can allow investors to settle in their pockets and obtain some of the best assets without redemption fees. Dividend reinvestment can increase the investor's share, which is equivalent to the investor subscribing with dividend funds, but there is no need to pay a subscription fee.
Second, lock in part of the gains. Choosing the first dividend method of cash dividends can help investors lock in a part of their returns. **, you can also avoid the risk of a significant drawdown of funds.
Third, improve the investment experience. For managers, dividends can be appropriately reduced, so as to facilitate better rebalancing and other activities, and facilitate management. **After dividends** the net value of the unit decreases, it may be relatively better for new investors to have a lower net worth*** investment experience.
In addition, the ability to pay dividends shows that it has a positive return, reflecting the relatively stable operation, which reflects the profitability of the company from the side and helps to increase investors' confidence in it.
Investment is risky, and you need to be cautious when entering the market).