What kind of advantage does dividend reinvestment plans provide?

Answer transcript: None. Initially, most funds had dividend plans. A lot of investors decided they didn't want dividends and so growth plans were introduced. For investors who chose dividend plans but don't now want dividends, the reinvestment of dividends effectively converts their plan to a growth one. Most equity investment is meant for the long term and the idea is to accumulate capital over time rather than get periodic income. You should hence choose a growth plan.

This article was originally published on April 06, 2017.