Are the dividends paid under mutual funds deducted from the profits that the mutual funds make when selling units in the markets?
- V. N. Kale
The NAV, which is the price of units for investors, reflects the value of stocks (and some incidental cash) that the investor will hold by way of one unit. Mutual funds do not make profit when they sell additional units in the markets. Whatever is distributed by way of dividends is a part of scheme’s assets and the NAV falls to the extent of dividend distributed. To pay dividends, funds use the proceeds from new investments or from selling of securities they hold in their portfolio.