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I am confused about mutual funds having Institutional Option or Growth option in the same scheme. Which plan should I invest in for a tenure more than 10 years?
-Vikas Kumar
Institutional plan and Growth option are not two comparable types of plans. Institutional is a type of plan in which you could choose Growth, Dividend or Dividend Reinvestment option.
Earlier each fund had multiple plans like institutional, retail, super institutional etc. Institutional or Super institutional plans disallowed investments from common investors with high investment minimum. Sebi did away with multiple plans and mandated that each fund can operate just two types of schemes- Regular or Direct. Few funds still carry ‘Institutional’ in there name. These available Institutional plans are either suspended for sale, which means they do not accept fresh investment and will continue to be managed until all assets are withdrawn; or they have retained operations as Institutional plan but function like a Regular plan.
About Growth and dividend option of a plan, long-term investments are better off in the growth option as the gains made on your investment will reflect in the higher NAV of your units. Dividend option suits those looking for regular income from investments. However, There is no variation in the return of the two.
This article was originally published on June 03, 2013.
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