There are a variety of options available to the investors when investing in mutual funds. The investors have options in these investment plans to choose from according to the needs and financial capabilities as well as the financial goals. The investment plans offered by mutual fund houses are aimed to satisfy various needs and financial goals of the investors. The important options for investment plans that mutual funds offer are as below:
Under the growth options, dividend is not paid out to the investors. The investors can realize the value only in the form of capital appreciation (by an increase in NAV) on their investments. Basically there is no option of dividend payment under this option. The invested money remains invested till the time investment is realized or sold.
Dividend payout options
Under this option dividends are regularly paid out to investors. Because of the payment of the dividends the NAV of the fund is reduced to the extent of the dividend paid out and the overall value of the investment goes down to that extent.
Dividend re-investment options
Here, the dividends that accrue on funds are re-invested into the purchase of additional units in open-ended funds. In most cases, mutual funds allow investors to either collect dividend or re-invest the same.