lifestrategy 80

Thrugelmir

EthicsGradient said:

dd95 said:

i think im overcomplicating it. I didn't think the capital growth would compound as it may gain 7% one year and then the next it may lose 12%. At least with the dividend you are getting a set amount of increase every year into the fund that compounds over time.

The dividend is not truly 'set' - in the last 8 years, it has varied between 1.3% and 1.8% of the unit price. That is, however, a lot less variation than the annual increase, or decrease, of the unit price itself.

The dividend is generated from the income on the underlying investments. While 2019 may have been good in terms of stock market indices and therefore fund unit prices. Underlying corporate profitability lagged behind somewhat. According to JP Morgan corporate profitability only grew 1% across the USA, Europe and Japan. While Emerging markets fell 8%.  Hence why investing should be viewed as a long term pastime. As ultimately the elastic between the two factors keeps individual share prices in check.