We normally invest money in mutual funds. But what are the options available under mutual funds to manage our money better. We can look to below three options;
Growth Option:
Under this option the scheme does not give you any dividend or reinvest your dividend. Whatever the gains made the scheme will be ploughed back into the scheme. That amount is used to buy more stocks or held in cash till better investment opportunity arises. The gain in reflected in the NAV of the scheme. If the fund manages Growth Option and Dividend Option you many notice that NAV of Growth option is more since there is no payout.
Dividend Payout Option:
Under this option the scheme pays out dividend to the investor on the gains made by them at periodical intervals. But this dividend is not guaranteed. If the scheme makes good gains you receive dividend otherwise not. As the dividends are payouts the NAV of the scheme also falls as per the percentage of of Dividend declared. You may have noticed ads saying that this scheme has declared 45% dividend etc and they will also declared ex-dividend date. If you invest before that date you will receive the dividend declared otherwise not.
Dividend Reinvestment Option:
Under this option the the scheme declares dividend if it makes good gains but the dividend is not paid to you, it is reinvested in your scheme so that your holding of units increases. So you have made fresh purchases without investing money from your pocket. Here also the NAV of the scheme falls after the dividend is paid.
