The following mutual fund investment options are among the most popular in the market:
1. Dividend Option
Any mutual fund scheme like equity, debt, or hybrid fund schemes, can offer dividends to their investors or unit holders from the profit of their portfolio. These profits are made from the investment in various instruments like equity, debt securities, money market, etc.
A dividend fund scheme can pay dividends to its investors monthly, quarterly, or yearly, depending on one scheme to another. There is no guarantee to get the dividends at a fixed time, as it depends on the market and fund managers
This scheme may be ideal for those investors who need some cash flow
2. Growth Option
In the growth option, the fund manager of the mutual fund company reinvests the dividends of the investors. This reinvested dividend amount shows the increments in the NAV(Net Asset Value) of the mutual fund company.
Investing through the growth fund option for a longer period might help you gain higher returns as this scheme reinvest your money.
3. Dividend Reinvestment Option
As the name suggests, in the Dividend reinvestment fund scheme, the fund manager does not pay the dividends to their investors; instead, he purchases the new shares on the behalf of the investors and transfers the new shares to the investor’s accounts.
By doing this, the number of owned shares by the investor keeps growing, and the investor’s accounts keep growing the value of shares over time
Difference Between Growth Option and Dividend Reinvestment Option
Both growth and dividend reinvestment plans do not pay a dividend. However, a fresh number of units are allotted to the investors at a reduced NAV in a dividend reinvestment plan. In contrast, in the growth plan, the NAV of the fund goes up
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