All Mutual schemes has two options XXX – Fund(D) & Fund (G) and NAV is lesser for (D) and NAV is more (G). What is the difference between dividend and growth Mutual Funds? which one is the best to choose..? how to come to a conclusion..?
Raguvaran-D stands for Dividend and G stands for Growth. In simple terms, whenever the fund grows, there are two ways to get the benefit for investors. Get back of whatever earned-This is called Dividend Option and second option is to grow further of what it already grown to generate a better compounding return. Usually when you expect some income from a fund then opt for dividend option. However, if your plan is to create wealth then opt for growth option.
Now there will be NAV difference. Because whenever mutual fund companies back to you some amount as dividend then in same proportion the NAV will also falls. Due to this NAV of dividend funds will be lesser. However, in growth option, there is no such pay back and it will be intact. Hence, the NAV will be at higher end compare to dividend option.
Hope I cleared your doubts 🙂