IndianMascot
Core Member
Ok. Will invest 1K in both.
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- Thread starter Technoglitch
- Start date
After reading this, I thought of sharing here
direct plans give a much lower dividend per unit compared to the equivalent regular plans. Why do direct plans give lower dividends, especially because this problem is made worse by their higher NAVs? Now let's look at the misconceptions that investors have about mutual funds.
Misconception: Dividends are returns A lot of investors think this is true. The problem lies with the word 'dividend'. Compared to dividends on shares, this word has a completely different meaning in funds. In funds, dividends are not an additional income, but just a withdrawal from your capital. If the value of your investment in a fund is Rs 1 lakh, and the fund gives you Rs 5,000 dividend, then post dividend, the value of your investments will be Rs 95,000. There are no exceptions to this and there is no additional benefit at all.
Misconception: NAV is important This misconception is actively propagated by fund salesmen in order to push new funds, which start at a low NAV. Actually, all that matters is the investment management of a fund. A fund with an NAV of Rs 10 and one with and NAV of Rs 100 will give the same returns if their portfolios are the same. You may have a higher number of units in one, and fewer in the other, but that's irrelevant. If a fund gains 20%, your Rs 10,000 invested in it is going to grow to Rs 12,000. This could be 1,000 units at an NAV of Rs 12, or 10 units at an NAV of Rs 1,200, there's no difference.
What you should know about mutual fund dividends and NAVs - timesofindia-economictimes
direct plans give a much lower dividend per unit compared to the equivalent regular plans. Why do direct plans give lower dividends, especially because this problem is made worse by their higher NAVs? Now let's look at the misconceptions that investors have about mutual funds.
Misconception: Dividends are returns A lot of investors think this is true. The problem lies with the word 'dividend'. Compared to dividends on shares, this word has a completely different meaning in funds. In funds, dividends are not an additional income, but just a withdrawal from your capital. If the value of your investment in a fund is Rs 1 lakh, and the fund gives you Rs 5,000 dividend, then post dividend, the value of your investments will be Rs 95,000. There are no exceptions to this and there is no additional benefit at all.
Misconception: NAV is important This misconception is actively propagated by fund salesmen in order to push new funds, which start at a low NAV. Actually, all that matters is the investment management of a fund. A fund with an NAV of Rs 10 and one with and NAV of Rs 100 will give the same returns if their portfolios are the same. You may have a higher number of units in one, and fewer in the other, but that's irrelevant. If a fund gains 20%, your Rs 10,000 invested in it is going to grow to Rs 12,000. This could be 1,000 units at an NAV of Rs 12, or 10 units at an NAV of Rs 1,200, there's no difference.
What you should know about mutual fund dividends and NAVs - timesofindia-economictimes
IndianMascot
Core Member
scorpionking76 & Deepu bro. Is this right about direct plans ?
My take on this is both direct and regular funds have 2 options - dividend and Growth
When we select dividend option, we get some dividends periodically and as mentioned in the above post it will be given by deducting from existing NAV so NAV will become less.
Next is Growth option where you will not get any periodic dividends and NAV will not be touched
When we select dividend option, we get some dividends periodically and as mentioned in the above post it will be given by deducting from existing NAV so NAV will become less.
Next is Growth option where you will not get any periodic dividends and NAV will not be touched
Difference between direct and regular funds is in regular funds commission will be payed to brokers which will be deducted from your NAV and NAV will be little less when compared with direct funds where there is no commission payout as we are directly investing with AMC
scorpionking76
EntMnt Knight
Since this is invested through DMAT, I reckon a small percentage will be deducted as commission as well. It will be in T&C
IndianMascot
Core Member
Bascially it doesn't matter much if we go for Direct or Regular for small SIPs. right ?
It will matter over a period of time
DEMAT is not required for investing in MF