About fund “net value normalization”

Fund “net value normalization” is indeed a practice adopted by fund companies to attract investors to invest in funds at a lower par value of one dollar. This approach was due to the bull market in 2006--2007. Fund companies bought more fund shares for funds that investors thought were lower at that time, and investors did not dare to buy higher funds because of the net fund value. A (dividend-split) method is adopted to promote and attract investors to invest in the fund. For investors, they need to pay attention to the difference between "dividends" and "splits" when choosing a "net value normalized" fund. Just like dividends, when a fund is split, it can also reduce the net value of the fund and bring its price to a face value of one yuan, allowing investors to buy high-quality old funds at a low price. But specifically, the same feature between fund splitting and large-proportion dividend distribution is that by reducing the net value of fund shares, investors can purchase fund shares at a lower price and promote fund share sales; the difference between the two methods is that , Fund share splitting can accurately adjust the net value of fund shares to 1 yuan, while large-scale dividend distribution makes it difficult to accurately adjust the net value of fund shares to 1 yuan, and can basically only be adjusted to around 1 yuan. In addition, according to the current fund accounting methods, only realized income can be distributed, so the net value of the fund share cannot be accurately adjusted to 1 yuan through dividends. On the other hand, the method of fund share splitting is to directly adjust the number of fund shares to achieve the purpose of reducing the net value of fund shares. It does not affect the fund's realized income, unrealized gains, paid-in funds and other accounting items and their proportional relationships, and it has no impact on investors' interests. There is no material adverse impact on equity. It should be reminded that the effect of fund dividends and spin-offs has a certain relationship with the market trend at that time. Similar to listed companies distributing dividends, fund dividends are similar to listed companies distributing cash bonuses, while spin-offs are a bit like listed companies giving out bonus shares. In a bull market, investors tend to prefer giving away shares, while in a bear market, investors are more willing to "take it easy", that is, they prefer companies to distribute achievable earnings in the form of cash. At the same time, a large proportion of fund dividends requires the stocks to be sold in the secondary market, thereby converting them into realizable gains and then distributing them to fund holders. Under certain circumstances, if fund groups collectively sell stocks, it will often put significant pressure on the secondary market and trigger violent market fluctuations. However, the fund does not have the above-mentioned "cash-out" problem during the spin-off process. Therefore, market trends after large-scale fund dividends are particularly worthy of attention.