Mutual Fund – Growth Vs Dividend Option
While buying Mutual Fund, we have options to choose like growth or dividend. We should know about those options, which will make us choose the right one according to our requirements.
Growth option:
- All money will be invested in this option until redemption.
- No short term or regular income will be received from the fund before redemption.
- This option is suitable for long term investment.
- Wealth creation is high in this option due to power of compounding in long term investment.
- Long Term Capital Gain is tax-exempted.
- Growth option is best in Equity Fund for long term.
Dividend option:
- Short term or regular income in form of dividend will be received from the fund before redemption.
- This option is suitable for getting regular income for people like senior citizen etc.
- Wealth creation is moderate in long term in this option due to inefficient power of compounding as compared to growth option.
- Dividend is tax-exempted in the hands of investor. But Mutual Fund company may have to pay DDT (Dividend Distribution Tax).
- Long Term Capital Gain is tax-exempted.
- Dividend option is best in Debt Fund for short term.
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