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.

13 comments:

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Affordable Life Insurance Quotes said...

Also the divident reinvestment option in mutual fund is safe and less risky.

Cost of Dental Veneers said...

hey
i didnt get that ,the heading is to give the diff between growth option and DRO . but then you are saying that thee is no difference . i didnt get that .

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Aaradhna said...

Hi,

Basically Growth and Dividend Re-investment options are the methods by which you can get paid the returns.

The fundamental difference between them is the method in which the returns are distributed to the investor. Rest of the factors remaining the same, investors opted for any of these options would get their returns distributed differently.

For more info:
http://www.sundarambnpparibas.in/learn_mutual/learn_mutual.htm#5

Regards,
Aaradhna

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Seenath Kumar said...

I really liked the way you described Growth option and Dividend reinvestment. Mostly mutual fund investors are not aware of this information this will really help.

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