Simplified: Mutual Fund Growth, Dividend and Dividend Reinvestment Options

Many investors get confused about making a choice among mutual fund growth, dividend and dividend re-investment options. Here is how to make the right choice.

Welcome to FundooMoney, your 24X7 buddy for all your money matters! One of the major areas of confusion for many investors of mutual funds is about the difference among growth, dividend and dividend re-investment options. Stay tuned, as in a short while any such confusion will become history.

Dividend option
Dividend is the part of profit which the mutual fund shares with its investors from time to time. Dividend option is of two types:

Dividend pay-out and Dividend re-investment

Dividend pay-out
In case of dividend pay-out option, the dividend amount goes to the investor.

Dividend re-investment
Here, the fund allots number of units of the same value as the dividend to the investor at the revised prevailing net asset value (NAV) of the scheme. Remember, the NAV falls in the same proportion as the dividend. In dividend reinvestment option, number of units grows according to the dividend amount.

Growth option
In the growth option, the fund doesn’t share any part of the profit from the investment made by the investor and re-invests it to the scheme. This helps NAV keep growing. That is also the reason why the NAV of a growth option is always higher than the scheme’s dividend option.

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