Thursday, May 29, 2008

Difference between Growth, Dividend Payout and Dividend Reinvestment

Dividend Payout: Mutual Fund companies as when they keep on making profit they distribute part of the money to the investors by way of dividends. If you want to keep on taking part of profit regularly you are advised to select this option wherein you can keep on getting back money frequently.

Dividend Reinvestment: This option is similar to the first option except for the difference that dividend declared is re-invested in the same fund on the same days NAV. so all your profit is invested back in the same fund to make it grow more.

Growth: This option is for the people who have long term financial goals and they dont need money regularly. In this option mutual funds NAV will keep on growing and it will never declare dividends. so overall at the end of the investment term you get larger kitty.

NOTE: Returns per say calculated on each of this 3 option will be the same. The only difference will be the way in which you take out your money.

1 comment:

Rahul V said...

What do you mean by "NAV will keep on growing and it will never declare dividends" It keeps growing in Dividend option as well. At least in dividend option I see tangible benefits.. how can I confirm/ compare that absolute returns in both Growth and Dividend option are same?

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