QUOTE(Hansel @ Sep 24 2017, 11:52 PM)
I don't like your tone of voice,... your bullshit,.. go learn all your theories the hard way,... if you never made money money,... you can carry your theory with you till the grave and never get to invest big,...
Haha,... and I thought I'd like to target you to teach you everything abt investing overseas, opening accts, etc,...
Guessed I'll find someone else,...
You can private message him (xuzen) to get clarification he's very experienced. Because you are not believing what people who have decades of experience in UT are saying. (I only have 1 year of exp and so far what they say are true) so don't look at me.
You need to accept that your thinking about unit trust distribution all this time is flawed. Time to be "flexible". If you don't accept this fact, like I said you will be conned by "juicy dividends". That's why you see all agents in Malaysia are harping about "unit trust dividends". Nicely print out big poster/take out full page ad in the newspaper to "announced" 8-10% dividends when in actual fact they are not making money.
Reason they are doing that:
- Dividends/distribution sells even though the fund is lousy. People will buy into that and they make more money.
Read this: (it's old and from India but it's fact) I got a little time to dig these articles up.
QUOTE
To appreciate the point about dividends being a misleading indicator, it's important to understand how mutual funds offer a return. Mutual funds give a return by way of appreciation in the net asset value. Being market-linked, its NAV fluctuates on a daily basis; when at any point its NAV is higher than the level at which it was bought the investor has made a profit (generated a return) on his mutual fund investment.
In reality, this is the only way in which mutual funds give a return i.e. NAV appreciation. How about the dividends, doesn't that also count as a return? Not really, because the dividend can be declared only if there is an NAV appreciation.
Confused with all this? An illustration should do the trick for you. Observe what happens to the NAV of a mutual fund after it declares a dividend.
From one hand to another
Cum-dividend NAV (Rs) 15.0
Dividend (%) 20.0
Dividend (Rs) 2.0
Ex-dividend NAV (Rs) 13.0
Notice in the illustration that the cum-dividend NAV is Rs 15.0 (this is the NAV before the dividend declaration). The mutual fund declares a 20 per cent dividend. It is obvious from the illustration that the mutual fund does not declare this dividend from its own pocket; it is drawn from the NAV. So an investor who invests in the fund anticipating a dividend declaration should consider this point before hitting the invest button. After all the money for the dividend will only be deducted from his NAV; he will be richer by Rs 2 per unit (going by our illustration), and poorer by the same amount (since the ex-NAV will also fall by Rs 2). At the end of the day, the dividend-seeking investor has no doubt pocketed the dividend, only to see an erosion in his capital by a similar margin.
In our view,
investing in a mutual fund for the sole purpose of pocketing easy money (by way of dividend) can be a recipe for a disaster. This is no way to invest in a mutual fund.
http://www.rediff.com/money/2008/jan/30nav.htmQUOTE
But it is not necessarily something investors should get too excited about. What the dividend is worth? These dividends come from the funds' NAV (net asset value) and, therefore, can be likened to redemptions. Suppose you hold 1,000 mutual fund units with an NAV of Rs 20 and the fund house declares a dividend of Rs 2 per share. Since the dividend is coming directly from the NAV, the NAV will fall by Rs 2 to Rs 18.
Even as you pocket Rs 2,000 as dividend, the value of your holding comes down to Rs 18,000. Had you redeemed 10% of your holding, the results would have been same— you would have got Rs 2,000 in your hand and your mutual fund holding would stand at Rs 18,000.
While regular dividend from a company shows that its prospects are good,
regular dividend from mutual funds means nothing. Given that dividend payouts do not result in any net gain to the investor, why do mutual funds declare dividend? One reason is that funds do it to
create a positive perception among investors. Indian investors often confuse mutual fund dividends with company dividends and treat them as a net gain.
http://economictimes.indiatimes.com/wealth...ow/50052578.cmsWho better to hear than from horse mouth?
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However, it is utterly important for investors to understand that this is unlike the dividend earned through equity shares investment, where a listed corporate distribute its profits earned with shareholders. The income distribution process of a mutual fund is merely a function of portfolio movement (usually upward), resulting in profit taking (returning money to investors) with an impact on the NAV.
For instance, an investor has invested RM 10,000 into Fund A (growth-oriented fund) and Fund B (dividend-oriented fund) respectively. Assuming each fund delivers 10% return after a year, and only Fund B declares income distribution of 10%, the investor has opted to receive his income distribution via reinvestment in units of Fund B. The table below depicts the investor’s portfolio after a year.
Table
With reference to the table above, should the investor opt for cash payment, he should receive RM 1,100.00 (RM0.99/unit * 1111.11units), and the investment value should decline subsequently by the same amount accordingly (RM 11,000.00 – RM 1,100.00 = RM 9,900.00). Thus, in effect, mutual funds’ dividend declaration or income distribution is merely returning investors’ money back to them.
In fact, it is possible for unit trust to declare income distribution, even if it doesn’t deliver any return over that particular period.In the race to
garner more asset under management (AUM), some fund houses have resorted to tactics of declaring dividends frequently, as this may lead to misinterpretation that the funds are doing well and investors may be inclined to invest more into the “good dividend” funds. Investors who fell prey to this may be left with empty baskets in the long run.
https://www.fundsupermart.com.my/main/resea...June-2017--8510
Sep 8 2017, 12:56 AM
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