In a mutual funds what is beneficial Growth or Dividend fund beneficial.?

Question

If Dividend is chose re- investment or pay out what is beneficial.
Please explain in details.

Answer 1

For equity schemes, if you hold for more than a year, growth is preferable, as you can sell all your units with paying any tax.

For equity schemes, that is held on a short term basis, dividend option are preferable. Thats because once you obtain a dividend, the NAV for the fund drops by the amount of dividend paid. Hence when you sell your initial units that you purchased from the fund, you are most likely not going to pay the short term capital gains tax - because even though market may have gone up, the fund declared dividend and reduced its NAV so that you can show a loss or much lesser profit for Short Term Capital Gains

If you want to mimic the Growth option without paying too high a short term gain tax, then opt for Dividend reinvestment scheme.

For debt schemes, growth option is preferable, because the tax on dividend distribution (13.2% ??) is higher than the short term capital gains tax.

Answer 2

Growth option: The NAV of your units keep growing (similar to appreciation of share price). You only make money when you sell your units. The income will be treated as Capital Gains. Dividend option: The Mutual Fund may declare a dividend any time. The NAV of your units will fall by the same amount. This is like selling parts of your holding to book profits periodically. Within dividend option there are usually two sub-options: Dividend Payout or Reinvestment. In the latter, dividend amount is used to purchase units of the same fund on your behalf. So your no of units will increase but the NAV will fall. The income is free of tax in your hands but the Mutual Fund pays a "dividend distribution tax" of about 14% for debt oriented mutual funds. So if you plan to stay invested for more than a year, your income will be tax free under both Growth and Dividend options (for equity oriented mutual funds) since long term capital gains (on an equity oriented mutual fund) are tax free.

Answer 3

As the tax law stands today in India, there is no difference between the Growth Option & Dividend Reinvestment option in a mutual fund (equity oriented)
Both will yield the same market value of your investment.
But in the future, if the Long Term Capital Gains Tax is imposed go for the Dividend reinvestment.
If the Govt. were to introduce the Dividend Distribution tax (on the mutual funds, not you) on equity oriented funds, then go for the Growth option.
(Equity oriented fund means a fund that invests at least 50% of its corpus in equities)
But as of today, since there is no Long term Capital Gains Tax for you, as well as no Dividend distribution Tax on the Mutual Funds (provided it is equity oriented), either option yields the same result.

Answer 4

Growth fund

Answer 5

dear...........if you are going to invest a huge some of amount at that time dividend is best..............incase your investment is lower than 50000 than its better to move growth scheme

Answer 6

4 youth growth is good as retirment plan with small investment

4 old div is good as regular income with big amt.

try aptistock freeware

with buy sell signal of stock chart

Answer 7

plz let me know ur age and approx amt u want to invest??but growth is always better that past 7 yrs data is showing.