Those who invest in mutual funds, should know whether they will get dividend or not?

New Delhi. Nowadays investing in mutual funds has become a fashion. However, investing in them is good and profitable too. For those who invest in the long term, there is no better option than mutual funds, because equity funds linked to the stock market give a return of up to 12-15 percent. But people who invest in it do not know that mutual funds also give dividends. This is because people generally consider it a means of making big money in the long run. Today we are talking about their dividends.

There are many categories of mutual funds. But from the point of view of making money, it is divided into 2 main categories – 1. Dividend option, and 2. Growth option. When you buy a mutual fund scheme, you have to decide whether you want to take dividend or stay in growth. Both options make money. All funds give dividend every quarter. In the growth option, the dividend is reinvested (automatically) in the same scheme. But in the dividend option, the dividend received every quarter comes into the investor’s bank account. You can opt for any one of these two options in the same scheme.

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What is there in dividend option?
Dividend is better for people who want to earn regular income. Because in this, a part of the fund’s earnings is directly given to the investor in the form of dividend. This can be monthly or quarterly. In the dividend paying option, the NAV is low because after paying dividends continuously, the total value of the fund decreases. Whereas in the growth option, the opposite happens. Whatever dividends are received under this option, they come under the purview of income tax.

What about growth options?
As you already know, the earnings of the fund are reinvested in the same fund. So, whatever dividend is received directly by the investor, it is reinvested. This also has compounding growth. It means compounding. You are earning on your principal, and you are also earning on the earnings of the principal. In this, you get a higher NAV because when the earnings are reinvested, the overall value of the fund increases. The value of NAV goes up. In this, the investor has to pay capital gain tax, that too when he redeems the fund. This tax is usually less than the tax levied under the dividend option.

So which option do I choose?
The important question is which option should you choose. If you are investing for a long time and want to see an increase in your capital, then you should choose the growth option, because in this the money grows a lot due to the power of compounding.

If you are investing for the short term, or you are investing with the aim of generating regular income, then the dividend option would be better. In this, the investor keeps getting cash continuously. However, the capital does not grow.

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