I am confused when selecting between the growth and dividend option when investing in a mutual fund. Which one should I go for?
Sriram V
A good way to address your confusion is to check your financial needs. If you need income or regular payouts from your mutual fund investment, you should choose the dividend plan. However, if you can hold on to your investment for a longer period, you should choose the growth option.
In a growth plan, the gains made by the scheme are reinvested. Therefore, the net asset value (NAV) moves up. In a dividend plan, the gains are periodically distributed as dividend. So the NAV drops to the extent of the dividend, whenever it is paid out. There is also the dividend reinvestment facility in which you can put the dividend back into the scheme, buying up some more units.
This article was originally published on December 14, 2010.
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