Dividend Payout / Growth / Dividend Reinvestment – Which is the best ?
Posted by: moneyindia on: February 15, 2007
This is what we face upon meeting a prospective mutual fund investor. Our answer has been “It depends on the needs of the individual”. In spite of that, we are asked for our opinion. We have done a comparison by taking Sundaram Select Midcap as a sample fund. This fund has been declaring more than one dividend per year in the recent past and that should justify the selection of the fund.
Here is the link which gives the details….
http://spreadsheets.google.com/pub?key=plxMZsoeADBR8PaxoUEknNQ&output=htmlWe also did a comparison taking HDFC’s Top 200 Fund. The result was the same. Dividend Reinvestment option edges out growth and dividend payout.
3 Responses to "Dividend Payout / Growth / Dividend Reinvestment – Which is the best ?"
February 19, 2007 at 4:06 am
Hi Deepak,
Thanks for your comment. The change has been incorporated. As you rightly said, the difference could be attributed to higher management fees….
December 25, 2007 at 7:32 am
I need to understand the difference dividend reinvestement and growth
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February 18, 2007 at 3:47 pm
Ganesh, In your last line you’ve assumed that 18.78 is the NAV of the Dividend option – it is not, it comes down to Rs. 16.28 post dividend. Which means the net return is Rs. 95,833 as against a growth option of 94,611.
Still, that’s a Rs. 1200 difference. Perhaps attributable to higher management fees (?) but there’s something fishy here all right. The only other thing I can think of is that you will get short term capital gains tax on profits of units bought through the reinvestment – but it seems that this time there has been only losses in the past year (notionally).
Perhaps one needs to ask them…I’ll mail.