On the topic of Index Funds and dividends.
There is a point that I can’t wrap my head around no matter how many times I try, so I decided to write it down and hopefully find somebody willing to ELI5 this to me.
I own shares in an Index Fund (Total market stock fund). The fund description mentions that it pays dividends once per year. I also selected the option to have the dividends reinvested automatically in new shares.
At the end of last year, there was no dividends paid (it was clearly stated as “0” in the monthly report). The number of shares I own did not change either.
I really want to understand two things:
Number 1: where did the dividend go? Number 2: I was counting on the dividends to help me increase the number of shares I own in the fund. With no dividends paid, I was wondering: instead of holding on my shares, would it not be better to sell some for the profits I made last year (due to the increase in value of the fund), and buy additional shares with the money?
Please let me understand this concept. Thanks everybody!
Submitted June 15, 2017 at 10:55PM by Asm00dean http://ift.tt/2sgyYZ1
