I am a first time investor planning to invest in mutual funds. I am confused whether to opt for a growth option or a dividend options. Please help.
It is always good to see first time investors planning their investment choices carefully. Both dividend and growth options have their place in mutual fund investment and it all depends on one’s investment overview. For example any investment made undergrowth option mean that the number of net Asset value or NAV remains constant and any rise in NAV value of the mutual funds gives the investor capital appreciation.
In case you are looking for a regular income from your investment then opting for a dividend plan is better as it repays a part of the investment each year. What’s more, the dividend paid out by mutual fund companies is tax free in the hands of the investor. If you are planning for a long term investment, I would suggest growth option is a preferred choice.
When you choose the dividend option for your Mutual Fund, you will be receiving dividends that are declared from time to time by the Mutual Fund. You will also receive the capital appreciation, if any, if you decide to sell the Mutual Fund. In case you choose the growth option, you will not receive any dividends but will get capital appreciation. You have to understand that whatever profits that the fund receives, they will be distributed as dividends under the dividend option and will be retained within the fund for the growth option. Choose one that suits you.