Topic: Capital growth mutual fund and dividend growth mutual fund - difference between the two

please advice

Definition

o Dividend option means that whenever the fund declares a dividend, it will be distributed to the investors and it has two type Dividend Payout ,dividend reinvestment
o In Capital Growth option, fund grows if the fund performs well and there is no dividend distribution involved.

Usefulness

o Dividend Payout is useful for those investor which seek regular income and reinvestment is for who want market volatility benefit
o In growth option long term return is received and in bonus additional units are provided against existing units.

Taxation

o Dividend is tax free in the hands of investors and AMC but if investor withdraws before 1 year after reinvestment, then, the dividend amount becomes taxable.
o In growth option, STCG and LTCG are applicable. STCG of 15% is levied for redemptions before 1 year and LTCG in case of equity funds in nil

Impact on NAV

o In dividend option, the corresponding dividend amount will be reduced from the current NAV
o In capital growth, dividends are not declared and hence the NAV is not impacted

Impact on No Of Units

o In dividend payout, the no. of unit remain same and reinvestment results in increasing units
o In capital growth option, only additional purchase can provide extra no of units.

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