Dividend fund Vs Non Dividend Fund, which one is better?

Inexperienced investors who are interested in investing in funds may have a question about which fund they should invest in between a dividend fund and a non dividend fund. Today, ACU PAY will make you understand more about these two funds so that you can choose the fund that suits you best.

What is a “Dividend Fund”?

A Dividend Fund is a fund that pays returns to investors who invest in funds. Profits are paid as dividends to investors like us. The dividend is taxed with a withholding tax of 10% by calculating dividends and the frequency of payments depending on the fund policy.

Advantages of a “Dividend Fund”

  • It is suitable for people who want to plan post-retirement and want to spend cash on their daily activities.
  • The amount of “Dividend” will be more or less depending on the fund’s performance.
  • A source to make “Passive Income” and have cash flow that can be used along the way
  • Automatically sets up Take Profits to us, resulting in returns from the fund. This helps solve problems when the fund is profitable and we don’t sell out.

Disadvantages of a “Dividend Fund”

  • The dividend is “taxed with a withholding tax of 10%” which means that the “dividend” you receive is not 100% full, but only 90% will be paid.
  • Low amount of savings because dividends are not invested to grow more in the future. Moreover, regular dividend payments may result in a lower value of mutual funds as the same amount as the dividends.

What is a “Non Dividend Fund”?

A non-dividend fund is a fund that does not pay dividends to investors. However, the fund will continue to use the profit from investment to invest more which will increase the value of the fund so we can clearly see the power of compound interest. (in case investment continues to improve)

Advantages of a “Non Dividend Fund”

  • It is suitable for those who need a “long-term” target or a pre-retirement plan because even if dividends from shares in the fund are paid along the way but the fund does not pay dividends, it will add that amount to the fund and increase its value.
  • Do not have to pay “10% withholding tax” If we sell the fund, we get a full capital gain.
  • The fund will continue to invest in profit from operations (re-invest), thus creating compound returns. In the long run, we will have a much larger return.

Disadvantages of a “Non Dividend Fund”

  • It takes a long time to get a big savings without getting any returns along the way.
  • There is a risk of not receiving dividends, if funds investing in assets are volatile due to economic conditions such as stocks, when these funds are affected, we may just get over it.

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