Most of us are familiar with the term Dividend which one receives having invested in Equity shares or Equity Mutual funds. However, I have attempted to make a comparison for one to under stand and take a decision to invest in appropriate instruments.
Many a times people invest in Equity Mutual funds – Dividend option, The objective of this is not clear to the investor and sometimes to the advisor.
Please keep in mind the following.
a. Dividends are not mandatory to be declared.
b. There is no fixed frequency of dividend distribution. There are funds which have not declared divided for more than four years.
c. Dividend is from the NAV and it is not something extra you get from mutual funds. It is the appreciation, your investment has earned.
d. By opting for dividend, you deprive yourself of further growth and compounding effect the growth stocks would have had.
e. Look at any good performing mutual fund. say HDFC Top 200. in the last 20 years, the NAV of growth scheme has moved from 10 to 307 as on today 30 times.
Where as in the dividend option the amount declared as dividend is only 72. and the NAV is 45. Had you not opted for dividend, you money would have grown much more.
f. This will be true for many equity mutual funds.
g, Many a times the dividend is declared to woo investor.
Enclosed is the file which contains the comparison. REad and take a decision on better understanding
For any clarifications, please feel to contact me