Dividends from mutual funds may be a convenient option for retired people, but otherwise it has no merit
10-Sep-2015 •News Desk
I read your advice about dividend misconception. I agree with you, but I have some queries. Isn't dividend payout option suitable for retired people who have income from other sources? Isn't it true that when a senior citizen opts for systematic withdrawal plan their corpus is reduced while dividend option only reduces the value of investment. Also, isn't it a good substitute for returns from FDs from taxation and return aspects?
- Dattatreya V Pant
Time for Dividend Misconception to Go Away was an attempt at educating investors about the futility of dividend in a mutual fund investment. The whole point of the article was to tell readers that getting dividend in a mutual fund is equal to withdrawing money (redeeming, in mutual fund lingo). Dividend may be a convenient option for retired people, but otherwise it has no merit. It is not true that a scheme declares dividend only out of the profit, it may be forced to dip into your capital during bear phases in the market. It may not even declare dividend during a terrible phase. We believe those who are looking for supplementary income are better off planning their withdrawals in a systematic way.