What Are Growth Mutual Funds

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What Are Growth Mutual Funds: Growth vs Dividend Option

With so many mutual funds available in the market selecting a mutual fund for your investments can become quite a task until you know certain differences. one such difference is between growth and dividend options available into neutral funds let us check the difference in detail first let us see what makes these two products different in growth option you are not

One such difference is between growth and dividend options available into neutral funds. Let us check the difference in detail first let us see what makes these two products different:

In growth option, you are not paid out any profits made by our underlying investments in mutual funds the profits your are reinvested.

In dividend option, a part of the profits made by the underlying investments is paid out to the investors.

Growth and dividend mutual funds of a given funhouse perform at path but what separates these two is what is done with the profits and this ultimately impacts the NAV.

Profit reinvestment in the case of a growth option increases the nav resulting into capital appreciation in case of dividend option when the mutual fund house makes some profit the NAV first rises then a part of the profit is paid out to the investors, the NAV then reduces by the amount paid out to the investors per unit. Now after this profit distribution that is dividend distribution the new investments into the mutual fund are accepted at the ex-nav rate reinvestments of profits in case of a growth option has a compounding effect on your initial

Now after this profit distribution that is dividend distribution the new investments into the mutual fund are accepted at the ex-nav rate reinvestments of profits in case of a growth option has a compounding effect. Since your initial investment, as well as the returns, start earning more returns in case of dividend option since a part of the profit is paid out to the investors compounding effect is not at its full potential.

As already discussed, the growth, as well as the dividend option of a given mutual fund house, is the performance part, the fund performance is the same what differentiates them is what they do with the profits. So how are the gains realized in both these options in case of growth option you can realize the games only on selling the units in case of dividend option there are two ways through which you can realize your games first is

So how are the gains realized in both these options in case of growth option you can realize the games only on selling the units in case of dividend option there are two ways through which you can realize your games; first is through the dividends that you receive and the second is on selling the units as the NAV would increase in case the entire profits are not paid out to you through dividends

So to whom these two options best suit? People looking for capital appreciation over the longer period and not looking for periodic income should go for growth option and people looking for periodic income like retirees etc should go for dividend option.

Let’s look at the taxation now.

The taxation of growth, as well as dividend options of a mutual fund, is same if your mutual fund is an equity mutual fund and if you hold on to your investments for less than a year your gains are taxed at fifteen percent. If you hold on to your investments for more than a year your gains are not taxed if your mutual fund is a dead mutual fund and if you hold on to your investments for less than three years the gains are taxed according to your tax lamp if you

If you hold on to your investments for more than a year your gains are not taxed, if your mutual fund is a dead mutual fund and if you hold on to your investments for less than three years the gains are taxed according to your tax lamp.if you

If you hold on to your investments for more than three years your gains are taxed at twenty percent but after indexation.additional things to note about dividend

Additional things to note about dividend optional that the dividends are tax-free in the hands of the investors the mutual fund has to pay a dividend distribution packs in case of a debt fund which is 28.84% of the actual amount paid to the investors. In case of equity

In a case of equity mutual funds, there is no dividend distribution tax. Also note that the dividends are paid out only when the mutual fund makes some profit, so the factor that ultimately influences your decision when you want to choose between a growth and a dividend option of a mutual fund is your need. if you are looking for periodic income as well as a moderate capital appreciation of your investments you should go for dividend option

If you are looking for periodic income as well as a moderate capital appreciation of your investments you should go for dividend option.

And in case you’re not looking for periodic income from investments but looking for capital appreciation alone you should go for growth option hope the difference between growth and division option of mutual funds is clear enough

Hope the difference between growth and division option of mutual funds is clear enough

 

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