226) No Distribution? Did the Fund Make Money?

This is a popular question about Unit Trust investment.

The Unit Trust fund did not give any distribution.
Does this mean the fund is not making any profit?

The Unit Trust fund gave distribution even during a crashed market.
Does this mean the fund is making profit?

The Unit Trust fund gave a lower distribution than last year.
Does this mean the fund is making less profit?

Have you wondered about these questions?

Many people are confused between the term dividend and distribution in the Unit Trust context.
Unit Trust funds only give Distribution. Never give Dividend. 

Companies give dividend to their share/stock holders.

The main difference is the Distribution payment is from the Asset of your Unit Trust Units.
It means the payout amount will reduce the current Unit Price.

For example, the Unit Price is $1.00 and giving a distribution of $0.10.
The Unit Price will be $0.90 immediately after the distribution payment.

What if the same Fund did not give any distribution?
The Unit Price will still remain at $1.00.

It is the same like any other day between the distribution dates.

The Unit Trust fund price fluctuates according to all the investments market values.
If the current total value is higher than yesterday's total value, then the unit price will go higher.

Similarly, the reduction of the total values will reduce the unit price.

The Unit Trust fund give or not give any distribution is decided by the Fund Manager. It depends on the fund strategy, accumulated values, market conditions and future market outlook.

If the Fund Manager decides to keep all the investment value and want to invest as much as possible, they may not declare any distribution.

If the Fund Manager decides to reduce some of the investment value and not to invest all the amount, they may declare a distribution payment.

Normally, the Fund Manager will declare the distribution amount at the end of the Fund financial year's end. Although there are some funds that declare distributions twice a year. Some funds even declare distribution on monthly basis.

A fund that gives distribution can also be losing their total value during the market downturn.

For example, in 2018, the world stock market was affected by the US Federal Reserve increased the interest rates and the US - China trade war. Although most Equity funds lost value, many Equity funds still declared distributions.

As a summary, Distribution payment is not an indication of the fund's performance. 

Check the fund's actual performance by reading the Annual Report and Performance Graph. 

Distribution payment is more on the Fund Manager's fund management strategy.


For more information, please consult your Unit Trust Consultant.

More Related Articles:

253) Why My Unit Trust Fund Did Not Give Distribution?

http://highlevelrules.blogspot.com/2020/07/253-why-my-unit-trust-fund-did-not-give.html

250) Distribution Yield vs Total Return

https://highlevelrules.blogspot.com/2020/05/250-distribution-yield-vs-total-return.html

Click the link below to know the differences between Dividend vs Distribution.
http://highlevelrules.blogspot.com/2017/11/dividend-vs-distribution.html

Click the link below to know the Benefits of Distribution.
http://highlevelrules.blogspot.com/2017/11/benefits-of-distribution-in-unit-trusts.html