Is there any difference between dividend and growth mutual funds is a dilemma for every beginner investor. People invest

1. Is there any difference between dividend and growth mutual funds? is a dilemma for every beginner investor. People invest in mutual funds to have an extra regular income or to increase their wealth over time. To aid both situations, mutual funds are divided into two options – dividend mutual fund and growth mutual fund. A dividend plan is further categorized into two options – reinvestment and payout – which will be discussed further in the article. You must learn all the advantages and disadvantages of both plans before investing. Your investment plan should cater to you, be it a short-term or a long-term goal. After reading this article, you will know about the difference between dividend and growth mutual funds and would be able to make a more accurate decision. What is a growth mutual fund plan? If you invest in a growth mutual fund plan, the profit generated at the end of the year will not be credited to you in cash form. Rather, it will be reinvested in the mutual funds by the company on your behalf. This reinvestment will ultimately affect the NAV (Net Asset Value) of the mutual funds you held. If the scheme is in profit, the NAV will increase. However, if the scheme is suffering from a loss, the NAV will decrease. The only time when you will receive the profit in cash form is upon redeeming or selling your mutual funds. What is a dividend mutual fund plan? If you invest in a dividend mutual fund plan, you will receive the profit in the form of dividends. But you have to choose the dividend option because the dividend plan gives two choices i.e., reinvestment or payout. In dividend reinvestment, the unit of shares you held will increase whereas, in dividend payout, you will receive the profit in cheque or direct transfer in bank account. In this plan too the NAV (Net Asset Value) will increase but not the same as the growth plan. Because the profit is periodically distributed, the payout declared is deducted from the NAV at the year’s end. However, the dividend is given out only when the scheme is resulting in profit and at the discretion of the fund manager. At the time of loss, no dividend is paid out. Rwealth