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Dividend from mutual fund schemes could be a source of regular income
Published On , 7 Nov 2016 By ET Wealth
Payouts from Debt funds is an established theme; for payouts from Equity funds? go for diversified, large cap schemes with low volatility
First time mutual fund investors are often confused when they see that the same fund scheme is giving different NAVs for the same day. A little probe would reveal that this could be because there are growth and dividend options in every fund, along with regular and direct option. A dividend option is when the investor wants to use part of his/her gains from investing that the fund house pays him/her. A growth option is where the investment remains in the scheme and grows over time. And the investor, after remaining invested for several years, takes out the money when the Goal for which the investment was done is achieved, or when he/she needs it.
You can opt for the dividend option instead of the growth option when you fill up the form for investing in a mutual fund scheme
If you are a risk-averse investor who prefers to take some gains off your investments on a regular basis, you can opt for the dividend option
After you have made your investment in the fund, the fund manager may decide to pay some dividend to all the investors who had opted for dividend option
Usually good Equity funds pay dividend on a regular basis
Go for Equity funds with a good track record of dividend payments over several years
You should be mindful that the Equity fund you select has low volatility which is usually available in diversified, large cap Equity funds
You can also opt for the dividend re-investment option
In this case the dividend is allocated to your investment but instead of paying you the money, the fund houses uses the same dividend to buy more units of the same fund where you have invested
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