1. The performance of both options in equity funds will be absolutely same, with no difference in returns from your initial investment.
2. In the Growth Option,
a) The scheme does not pay any dividend, but continues to grow by reinvesting whatever gains are made when selling any fund holdings.
b) The amount is either used to buy some more stocks or kept aside as cash if no opportunities are immediately available.
c) The gains are reflected in the Net Asset Value (NAV) which rises over time.
d) Investors earn returns by selling their units at the higher NAV.
3. In the Dividend Reinvestment Option,
a) The dividend declared is not actually paid but used for buying more units.
b) The additional units are allotted with the dividend amount at the ex-dividend NAV, and the total units held keep rising with every dividend.
c) The NAV falls after the dividend is paid, and there is, therefore, no difference in the NAV of the dividend payout and reinvestment options.
4. Although there is no difference in the value of the investment between growth and dividend reinvestment options, the units of the reinvested dividends are treated as a fresh investments on the allotted dates for calculating the actual term for capital gains whenever sold.
5. Moreover, the dividend reinvestment option amounts to higher accounting that might complicate an investor's understanding.
2. In the Growth Option,
a) The scheme does not pay any dividend, but continues to grow by reinvesting whatever gains are made when selling any fund holdings.
b) The amount is either used to buy some more stocks or kept aside as cash if no opportunities are immediately available.
c) The gains are reflected in the Net Asset Value (NAV) which rises over time.
d) Investors earn returns by selling their units at the higher NAV.
3. In the Dividend Reinvestment Option,
a) The dividend declared is not actually paid but used for buying more units.
b) The additional units are allotted with the dividend amount at the ex-dividend NAV, and the total units held keep rising with every dividend.
c) The NAV falls after the dividend is paid, and there is, therefore, no difference in the NAV of the dividend payout and reinvestment options.
4. Although there is no difference in the value of the investment between growth and dividend reinvestment options, the units of the reinvested dividends are treated as a fresh investments on the allotted dates for calculating the actual term for capital gains whenever sold.
5. Moreover, the dividend reinvestment option amounts to higher accounting that might complicate an investor's understanding.