Options to select mutual fund returns

There are lots of doubts from people about the various options available to select the returns availability. While filling the form to apply for a mutual fund, you have to select one option from the group of Growth, Dividend and Dividend re-investment options. One doesn’t have exact idea bout how this work, cannot select the proper option. Selecting this option required little thinking to get your returns. Below are a detailed information and requirement of selecting each option.

When mutual fund house starts a fund, a subscriber can opt any of these three option. If you monitoring any mutual funds with the websites dedicated to mutual funds, give the name of a mutual fund, you will get two entries of same mutual fund. One is, Mutual fund name – Growth or (G) and Second is, Mutual fund name- Dividend or (D)

Growth option** If you select growth option, your fund value will be increased time to time by adding returns to your units just like how the stock prices are going up. A growth option generally not give a pay cheque or DD when declaring dividend under the mutual fund scheme. But some time, to enhance the fund, some mutual fund houses giving dividend pay cheque to their customers who select the growth option. This is very rare. To get the returns as pay cheque or DD, customer should redeem the mutual fund units.

Dividend option** When selecting dividend option, you are informing the mutual fund company to send the dividend pay cheque or DD whenever a dividend declaring under your selected fund. By doing this, you will get an income, but no guarantee on particular time, and the NAV of your fund value will remain same or less. Increase of fund value under dividend scheme happening very slowly because, returns distributing to customers.

Dividend Re-investment Option** While selecting this option, you are informing the company that you want dividend but don’t send the amount to you as pay cheque or DD but, buy more units of mutual funds of the same scheme. When declaring dividend, you will get informed with the dividend amount and the additional units purchased with that amount. The NAV value for the funds which falling under Dividend re-investment option is same to the Dividend option. You cannot use the Dividend Re-investment options to purchase units of the same scheme that has growth option.

Now, we want to know what is the requirements of selecting these options.

Selection of growth option will give a chance to investor to keep their money for long term to get handsome returns. He has options to redeem his fund after a period 6 months, in most cases, without any exit load. If some one not required a monthly or an income with an specified period can invest in mutual fund with Growth option will be good.

The option ‘Dividend’ can be selected if some one required income within a period of time. A person near to pension and after pension can keep his money to some well performed debt mutual fund i.e. Monthly Income Plans, Income plans etc., and can opt dividend option to get timely amount to meet his expenses.
Dividend Re-investment option is additional but selecting the same is not recommended. Instead of this, you can select the growth option. Dividend Re-investment option is good for those who is looking the law NAV price and required more units. But understand, buying a mutual fund with its NAV will never give you more income. That is just a myth.

This is all about the return options available with mutual funds and the reason why one required to select these option. Hope this will be useful to you. Feedbacks can be sent to investinternals@gmail.com . You can also comment on the same here itself.