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Fund Selection

Dr. Karthik invests every month in five funds. He wants to know his fund selection. He also wants to know which option is better - growth or dividend reinvestment. Read on to find out

I invest Rs 7,500 every month in five funds - HDFC Top 200, Reliance NRI Equity, Sundaram BNP Paribas Select Mid Cap, Magnum Global and Reliance Growth. How is my fund selection? Should I replace any? Which is a better option for SIP - growth or dividend reinvestment?
-Dr. Karthik

Your fund selection has been wise and a look at your portfolio returns reaffirms this. But you must remember to assess your funds vis-à-vis your risk profile. As of now your fund selection is such that the portfolio has a mid-cap tilt to it. Given your long investment horizon this should not be a problem per se. As to your second query there is no difference in returns between the growth and dividend reinvestment option. The difference between the two options arises only in funds that do not invest in equity instruments or those that invest less than 35 per cent of their assets in equity. Such funds attract a dividend distribution tax payable at the time of distribution of dividends. But since you are invested in equity oriented mutual funds there is no applicable dividend distribution tax either. So as long as you are investing in equity oriented funds you needn't worry about which option to select. And your choice can depend on whether you want a payout or increase the number of units.


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