The World of Investments and Money

Monday, August 20, 2007

Difference between Growth option and Dividend Reinvestment option in MF

So what is the difference between Growth (G) option and Dividend Reinvestment (DR) option of a Mutual Fund. At present, there is no difference.

There is no entry load when the dividend is reinvested in DR scheme. The dividend is simply used to buy back shares at the new NAV. As a result, the net effect of DR is same as it would have been in a Growth scheme.
If the tax policy changes in the future to either introduce dividend distribution tax, or long term capital gains tax, it would adversely affect DR and G options, respectively.

                                                                                                                                     
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