MF scheme, Dividend , Growth or Bonus

[manishbyte]

A mutual fund whose aim is to achieve capital appreciation by investing in growth stocks. They focus on companies that are experiencing significant earnings or revenue growth, rather than companies that pay outdividends. The hope is that these rapidly growing companies will continue to increase in value, thereby allowing the fund to reap the benefits of large capital gains. In general, growth funds are more volatile than other types of funds, rising more than other funds in bull markets and falling more in bear markets.

[life2007]

Hello friends

Sorry to possibly ask a dumb question. I am a new investor

After reading forums over here and analysis of DSP ML Equity fund, I find it is one kind of funds where one can invest for long or very long term with relatively less risk.

Would it make any difference if one were to opt for D (dividend) or G (growth) option? I find the Dividend option is existing from April 1997 while the growth fund started only in June 2007.

Please help to clear this doubt.

Thanks

Regards

JEET

[ritz1]

Hi,
Can anyone explain the difference between Growth and Dividend options in MF? Which one is better or preferable in terms of Tax savings MF or any other MF??

[Vicky78]

dividend is payed out by the fund as decided by the fund manager. the nav goes down once the dividend is declared. The advantage is that it is a way of partially booking profits. The disadvantage is that dividend distribution tax has to be paid . (I think it is 10%). In Growth option the money is collected in the end. Here if you remain invested >1 year there is not tax.

One is not better than the other. I personally prefer growth option as i am a very very long term investor.

[surfingminds]

its up to you if you Take Growth option your money will keep growing compounded way. but if you need cash periodic basic you can get through devident option. it depends on you .. no one can advice what is better
but i can surely advice if you don't need money keep it growing as i am not sure if you will utilise the divident as the DSP fund manager would do.

[life2007]

Surfingminds: Thank you

[ankitrastogi82]

Hi,
Can any1 explain the difference and working criteria of three different options in MF
- Growth
- Dividend
- Bonus.

Which one is good and in which scenario like I think, If one is takin NFO of ELSS then Dividend option is good as you will get more units and can get more dividend based on the units.

I dont know if I am right here, please guide me.

[njoy_deep]

Dear Ankit,

If you will go for Any of plan you will get more a less same thing in your hand.

I am giving Exp for the same.

You have Div. Option and NAV for your MF is 102 Rs. now company declares div of 12 Rs. You will receive 12 X no of units as Div and you MF's NAV falls to 90 Rs. and in growth plan it will be 102 only.

Growth : 102 X 100 (Units) = 10200
Div : 90 X 100 (Units) = 09000
: 12 X 100 (Units) = 01200

So your final amount will be same.

I will say if you are going for ELSS Scheme then go for Div-Reinvestment.

Why ?

In the same Example:

you will re-invest 1200 Rs. which you got as bonus. Rs. 1200 is you tax free income and the same you invested in Tax Saver so you save you liquidity.

If you want few money in hand after certain time then go for Div. (Bye the way there is no guaranty that MF ppl will give you Div after certain duration)

If you are list concern about liquidity and want constant growth then go for Growth.

(Kindly correct me if I am wrong at any point.)

[rsalecha]

i totally agree with the explanation given by njoy_deep. In brief you should opt as per your future goals.

[ankitrastogi82]

thanks for your early and well explanotary replies.. I got the picture now for growth and Div..
Is Bonus same as Dividend ?