Unfortunately most Mutual Funds declare dividend just to attract investors, while truly speaking there\u2019s no gain for investors.<\/em><\/p>\nNow that we are clear about Dividend \u2013 Let\u2019s see which option is best suited for an Investor in ELSS. Usually if this question was asked for Regular Equity Funds, I would have straight forward recommended Growth Option. But ELSS is a bit different and slightly more complicated product. It has a locking period of 3 Years i.e. you cannot redeem your investment before completion of 3 years. Let\u2019s see one by one what are the pros & cons of these 3 options.<\/p>\n
Growth:<\/strong> Here you leave your money to grow and cash out anytime after 3 years. Here the advantage is<\/strong>: Your gains get accumulated<\/strong> till the end without any erosion. So you can get handsome return at end of 3 years. The disadvantage<\/strong> being: There is no cash flow from the investment for 3 years<\/strong> in terms of Dividend.<\/p>\nDividend Options:<\/strong> There are two sub options in this case<\/p>\nDividend Payout:<\/strong> In this case the dividend is paid in cash back to you. Here the advantage<\/strong> is: You get some cash flows from your investment<\/strong> before completion of 3 years. But this is unpredictable & erratic and is totally fund’s manager decision. The disadvantage being: The final value of investment gets eroded<\/strong>.<\/p>\nDividend Reinvestment:<\/strong> In this case the dividend declared is used to buy more units of the same fund for you. But in ELSS the problem is every time a unit is purchased you can redeem it only after 3 years. So if you initially invested on 1st Jan 2010 and dividend is paid and reinvested on 1st Feb 2010 then you cannot redeem the dividend reinvestment units before 1st Feb 2013. This Dividend Reinvestment is considered at par with fresh purchase for all purposes. I don\u2019t see any reason why anyone should choose this option.<\/strong><\/p>\nTo conclude:<\/h2>\n
I personally prefer Growth option for all my Mutual Fund Investments as it lets me build a sizeable corpus at the end without any erosion in between<\/strong>. Most of the times when we get dividend, we splurge it without even thinking of reinvesting.<\/p>\nBut there may be situation where you need some cash flows from your investment and don\u2019t want to wait for 3 years, then go for Dividend Payout. But always keep in mind the dividend declaration is totally fund manager\u2019s prerogative. You cannot predict how much you would get and when. So it hardly helps!<\/p>\n","protected":false},"excerpt":{"rendered":"
In response to one of my previous post about Tax Savings Mutual Fund (ELSS), I got a query \u2013 While investing in an ELSS which option should I choose – Growth, Dividend Payout or Dividend Reinvestment? This is a question that haunts most of the new\/ First time investors. Actually the problem is most of […]<\/p>\n","protected":false},"author":1,"featured_media":4550,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[64,4,63,6],"tags":[969,970,968,2806,464,465,967],"uagb_featured_image_src":{"full":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS.png",1152,631,false],"thumbnail":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS-150x150.png",150,150,true],"medium":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS-300x164.png",300,164,true],"medium_large":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS.png",768,421,false],"large":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS-1024x560.png",1024,560,true],"1536x1536":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS.png",1152,631,false],"2048x2048":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS.png",1152,631,false],"yarpp-thumbnail":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2010\/01\/Tax-Saving-Mutual-Fund-ELSS.png",120,66,false]},"uagb_author_info":{"display_name":"Amit","author_link":"https:\/\/www.apnaplan.com\/author\/admin\/"},"uagb_comment_info":8,"uagb_excerpt":"In response to one of my previous post about Tax Savings Mutual Fund (ELSS), I got a query \u2013 While investing in an ELSS which option should I choose – Growth, Dividend Payout or Dividend Reinvestment? This is a question that haunts most of the new\/ First time investors. Actually the problem is most of…","_links":{"self":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts\/220"}],"collection":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/comments?post=220"}],"version-history":[{"count":0,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts\/220\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/media\/4550"}],"wp:attachment":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/media?parent=220"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/categories?post=220"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/tags?post=220"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}