Dividend-paying funds—what are they? A one‑article guide to dividend‑paying funds (bond funds).

What is a dividend-paying fund?

The primary objective of a dividend-paying fund is to generate returns through investment and distribute regular dividends to investors. This type of…FundTypically, a portion of the portfolio is allocated to assets that generate stable cash flows, such as high-dividend stocks or bonds, effectively creatingPassive income, which is why it is highly favored by investors who have retirement plans or require regular cash income.

How do dividend-paying funds make money?

The returns of dividend-paying funds primarily come from two sources: capital gains and dividends or bond interest.

• Capital gains refer to the income generated when the assets held by a fund appreciate in value on the market.

• Dividend or interest income refers to the dividends or interest paid by the stocks or bonds held by the fund.

Dividend-paying funds typically distribute dividends to investors on a regular basis (e.g., quarterly or annually). Investors can choose to receive these dividends in cash, or they can opt to reinvest the dividends back into the fund to purchase additional shares. Currently, all dividend-paying funds available on Futu Elephant Wealth offer cash dividends.

However, it should be noted that the dividend payout levels of dividend‑paying funds may fluctuate depending on market conditions, fund performance, or changes in asset allocation strategies. On the market, dividend‑paying funds are predominantly bond funds.

What is a bond fund?

Bond funds are investment funds that specialize in investing in bonds. Typically, bonds provide investors with fixed returns and repay the principal at maturity, making them less risky than stocks. Consequently, compared to equity funds, bond funds are characterized by stable returns and lower risk. Bond funds are composed of diversified bond portfolios, which may include (but are not limited to):

• Government bonds

• Corporate bonds

• Public-sector bonds

• Multilateral institutional bonds

When classified by geographic scope, bond funds can be broadly divided into global bond funds and regional or single-country bond funds.

By investing in bonds issued by multiple issuers and across various maturities, bond funds can reduce the risk associated with individual bond investments, delivering more stable returns and the potential for capital preservation.

You can gain exposure to the bond market by purchasing shares in a bond fund. The value of the bond fund fluctuates in line with the performance of the bonds it holds, allowing you to invest in bonds easily without having to buy and manage individual bonds yourself.

How do you buy dividend-paying funds (bond funds) in Hong Kong?

For the average investor, investing in bond exchange-traded funds, or bond ETFs, is more convenient.Bond ETFThe biggest advantage is that investors can avoid the hassle of selecting individual bonds and, at low cost, hold a diversified portfolio across various bond types, thereby achieving effective diversification.

Futu Elephant Wealth Fund offers a range of fund products, including money market funds (Cash Treasure) and dividend-paying funds. When you subscribe to funds through Futu, you can enjoy "zero fees": no commission, no platform fee, and exemption from subscription and redemption fees. The minimum investment threshold is as low as HKD/USD 0.01 per trade. Click the image below for more details.