Dividend stock funds literally refer to funds that mainly invest in stocks with high dividend yields. Here, the dividend yield is the ratio of dividends to investment funds, divided by the current stock price per share per year.
Dividend stock funds are usually operated by selling stocks if the stock price rises above the dividend yield, and on the contrary, if the stock price does not rise, they hold stocks until the time of dividend to make up for the loss of the stock price drop. As a result, dividend stock funds have the advantage of not keeping up with the stock index in the upward market and having a small drop in the downward or bearish market.
In fact, in 2005 and 2007, when the index rose a lot, general stock funds were 63.7% and 41.99%, respectively, relatively superior to dividend stock funds of 56.53% and 37.01%, respectively. On the other hand, in 2006 and 2008, when stock prices were adjusted or falling, dividend stock funds performed better than ordinary stock funds with 3.54% and -15.72%, respectively.
Another characteristic of dividend stock funds is that funds increase at the end of the year and decrease at the beginning of the year. This is because there are many short-term investments aimed at year-end dividends. Of course, dividends will be reflected in the fund’s base price at the end of December, and if the dividend is confirmed through regular shareholders’ meetings, the difference will be reflected in the base price at the end of the year. Therefore, it is true that the benchmark price will rise by the expected dividend rate at the end of the year However, it is never desirable to invest in dividend stock funds in the short term to get a dividend yield of 1-2% This is because dividend stock funds have to invest for a long time in anticipation of the reinvestment effect of dividends.
