I started as long term investor, and bought all the sales stories that Mutual Fund uses it.
After seeing 2 major bull and bear run, my views have changed..
1) There is nothing called "Long term investing". It is very loosely defined. Lets accept the fact, in long term we all are dead. So always there is fixed term. It could be 1yr, 5 yrs, 10yrs, 25yr.. but still there is definite term. Depending on our timeframe, the approach should change. If we are 5yr investor, then we got to know when is the time to book profit, how economy and mkt behaves in 5yr period, etc Otherwise, we just see paper profit and keep waiting for this to disappear in next bear wave.
Profit is only when it is in Bank else it is not a profit. So we got to have idea about profit taking as per our market behaviour in our timeframe.
Check out the behaviour of Japan mkt which has seen great time.. but now it is at a level which was 25yrs back. We also might see a great bull run till 2025.. but that will certainly end and nobody knows where will it land.
2) Growth or dividend option - If profit is left with Fund managers, then this profit will disappear in next fall. It will crash lot more because Fund managers can book profit and hold cash above 10% of their profit. Their hands are tied.. So they have no other option but to live with it and keep watching their fund loose everyday with the market.
So better to take your profit out.. and use the money wisely to enjoy the life (somehow our current Indian upbringing does not teach us about how to have fun.. It is good in teaching us how to slog and keep planing for future at the cost of present)
So, my preference is Take dividend out.
3) Div reinvestment - In my view, this is worse then opting of growth option. Cause u get the dividend, on the same day, fund will buy new units from u and collect entry fee. So by reinvesting mode, you
are feeding the fund manager by paying the entry load. And this investment is not goign to buy you any new portfolio or will change your risk. In case of growth option, you will still hold the same investment but will not pay the entry fee.
4) If one is smart, then better to take dividend out and take independent decision about where to park this money as if it is extra cash that u have in yr pocket. Depending on your current portfolio and risk profile, probably it might go toward fixed term investment, gold, real estate, or to your Family members.
Happy Investing.