"Distribution is very relevant especially to retiree investors who want a source of income. For this type of investors, basically what they can do is to invest in a fund that has a distribution policy, and elect to receive distributions in the form of CASH. To an investor who elect to receive distributions in cash, distributions are a form of income, a cash inflow; gains in NAV price are capital growth.
E.g. upon retirement you have RM1mil which you invest in a fund. The fund that you invested in made a return of 10% and declares 8% as dividend for the financial year, that's RM80,000 of cash inflow for you! Of course, when a distribution is declared and paid, the NAV price will drop proportionately. The balance of 2% that are not declared as distribution will be reinvested for future growth."
Was reading the first page and got slightly confused. i have 2 queries:
1. Distributions are a form of income for retiree investors.. but that's only assuming if the fund made profit right?
if the fund that the retiree invested made 0% profit but declare 8% dividend for the financial year, the retiree gets RM80,000 but that's basically his own money from the RM1mil and the value of his investment becomes RM920,000.
2. I was also just wondering why you made the statement that distribution is very relevant especially to
retiree investors[U] who want a source of income? as in, why only to retiree investors?
basically dividend can be relevant to anybody as long as the fund is making profit, right? take ur example that i quoted above.. what i'm saying is that the "dividend declared = source of income" in your example quoted above can be relevant to anyone and not just retiree investors.
do correct me if i understood wrongly. still trying to grasp the whole idea. thanks in advance.
Why care about distribution, as u say, it is still ur own money. For a retiree investor who need the money, just do the partial repurchase, then u will get the money u want.
Nov 3 2013, 10:12 AM
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