Jakarta, CNBC Indonesia – Dividends are certainly quite familiar in conversations about stock investment, but make no mistake if there are mutual funds that also distribute dividends to their owners.
By definition, dividends are the portion of a company's profits or income that is distributed to investors.
In relation to mutual fund investments, especially stock mutual funds, mutual fund investment managers receive dividends from the shares held in their portfolio. This dividend can be re-managed to increase the asset value per mutual fund unit.
However, it turns out that there are several types of mutual funds that also distribute dividends directly to investors. However, these dividends are not always in the form of cash, but can be in the form of additional investment units.
Fixed income mutual funds are one type of mutual fund that generally distributes dividends.
Please note that the dividend distribution process can have an impact on the net asset value per unit of mutual fund participation. This value can decrease because the dividends distributed come from the net asset value per unit of the mutual fund. Even though there is a decline in value, investors still benefit by getting additional investment units for free.
As an investor, you may be wondering whether it is better for investment managers to reinvest dividends rather than distribute them to investors. A temporary decrease in net asset value per investment unit (NAV per UP) can be understood as part of the dividend distribution process. However, when the value of assets in a mutual fund portfolio increases, the NAV per UP of the mutual fund will also increase.
So, even if there is a temporary decline in NAV, investors can still feel the benefits of additional investment units. By recalculating, the overall value of your investment can still increase.
[Gambas:Video CNBC]
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