1) Dividend
2) Unit split
In this post,I am going to educate about dividend distribution and what will happen to NAV after the distribution.
Let say;
>> Amount to invest: RM 50000
>> Current NAV price: RM 1.0593
>> Give out dividend: 5 cents per unit hold
Therefore:
>>Unit that the investor will receive if he/she is going to invest:
[(50000/1.065)/1.0593] = 44320.17 units
NOTE: 1.065 is one-time charge imposed(including management fee and printing twice a year prospectus and so on)
>>Dividend earned(percentage):
(0.05/1.0593)*100 = 4.72%
NOTE: 0.05 is from 5cents
>> Dividend earned(RM):
44320.17 unit * RM 0.0472 = RM 2091.91
>> Expected NAV after dividend distribution:
(1/1.0472) * 1.0593 = RM 1.0115
RM 2091.91 is amount of dividend that investor will receive if he/she wants to take out his/her investment right after dividend distribution.However, he/she will incur clear losses if he/she takeout the investment right after the distribution since amount that he/she will receive is [(44320.17 units * RM 1.0115) + RM 2091.91] = RM46291.76;less than the initial investment,RM50000 .I mention about this because some investors planning to do this tactic; takeout their investment right after dividend distribution.
Unit trust is medium to long term investment. (There is no clear cut duration to define medium to long term. But for me, 5yrs is considered as medium). Therefore,just continue with your saving. Below is the extra units earned and total units earned when he/she continue the investment.
>> Extra unit earned:
RM 2091.91/1.0115 = 2068.12 units
>> Total unit earned by investor after dividend distribution:
44320.17 units + 2068.12 units = 46388.29 units
In unit trust, amount of units hold by investor is important since it will determine your return when you want to redeem your investment. Just holds your investment until the NAV is goes up again and in the same time wait for BONUS/DIVIDEND and UNIT SPLIT from your investment company.Again, unit trust is medium to long term investment.
TIPS: Invest right after dividend declaration/unit split give out/bonus is also a best tactic since NAV is low and you will earn extra units for that.
