Pitfalls with Income-Paying Funds

“Distribution may be paid from capital of the fund.” Morningstar research finds that this can happen more than investors have desired.

Kate Lin, CAIA 21 June, 2021 | 8:00
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Piggy Bank with Cracks

 

Investors have been particularly wary of distribution out of capital, because it can result in an immediate decrease in the value of units. That means investors are left with a smaller amount of capital (as measured by NAV) after the distribution, than the amount they had started with, instead of earning more for the income.

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About Author

Kate Lin, CAIA

Kate Lin, CAIA  is a Data Journalist for Morningstar Asia, and is based in Hong Kong

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