The names of equity-income funds imply that they are aimed at investors who desire to withdraw their higher dividends as cash flow for spending. On the other hand, equity funds are aimed at investors who seek to reinvest their lower dividends for capital appreciation. However, more than 74% of equity-income investors reinvest their dividends—a reinvestment rate similar to that of investors in equity funds.
However, more than 74% of equity-income investors reinvest their dividends—a reinvestment rate similar to that of investors in equity funds. Why do investors who reinvest their dividends choose equity-income funds. This is what is called "the dividend reinvestment puzzle.
This is what is called "the dividend reinvestment puzzle. "You can read the rest of the article here.