While you put your money into any investment portal for money multiplication, always keep in mind a few check points which need to be confirmed before the investment is made. Like:-
- Is the investment Tax-efficient?
- Does it reduce or increase the tax liability?
- Does it grow in value?
- Does it provide regular returns like dividend or interest?
If you choose an investment that provides regular returns, like a bond or a deposit, you get no appreciate in the value invested. If you choose an investment that has potential to appreciate, there is no regular income in the form of dividend.
But Mutual Fund enables best of both worlds. They give investor an option to choose Dividend or growth. Investor can buy a debt fund and choose a growth option, thus opting for capital appreciation in a debt portfolio. Whereas investor can buy equity fund and choose dividend option, to get regular income.
Actually, all Mutual funds provide dividend and growth option to the investors. The dividend option aims at paying periodic dividends to the investor provided the fund has earned returns. The dividend payment may be at regular intervals like quarterly, half‐yearly or annually. The growth option provides long‐term capital appreciation to the investor which can be realized at any time the investor chooses.
One additional factor to focus on dividend and growth fund is the Tax implication. Both the option dividend and growth have different tax treatment. Dividend received from the equity fund is not taxable. Capital gains are taxed based on whether they are realized within a year or after a period of a year. Therefore investors have a choice, to decide on the option they need. If they need income, they can choose the dividend option. If they need growth they can choose the growth option.
Therefore any difference in return to the investor comes only from the tax implication. Investors need to choose growth, dividend payout, or dividend reinvestment, on the basis of the needs and tax preferences.
To select a fund appropriate for your needs and necessities, right to usHERE and get Expert Advisory to enhance your Mutual Fund Portfolio.