What is the difference between HDFC Growth and Dividend option? Ajay H, 08 Nov 2012

I have invested 1 lac in HDFC Top 200 recently.How much returns can I expect after 5 and 10  years respectively? Can you explain the difference between Growth Option and Dividend Option for the HDFC Top 200 mutual fund and which option is better?  

Fintotal Answer

HDFC Top 200 is among the best funds in its category. It invests mostly in shares of large companies and a few medium sized companies. Its returns will depend on how these top companies perform. If you expect the economy to grow at 8% annually  then you can expect top mutual funds to return above 14% annually. Most mutual funds allow you to choose between Growth option and Dividend option. Whenever the fund earns money from its investments it can either be paid out to you or be ploughed back into the fund. The former is dividend option and latter growth option. In didvidend option gains made by the fund (if any) is periodically paid to you every fortnight, month, quarter, etc. In growth option the gains are added to the fund and the fund keeps growing. This is reflected in the NAV. Mutual funds are not obliged to pay dividends so dividend option does not mean more safety. Equity mutual funds like HDFC Top 200 are for long term needs accruing in 5 years or more. Growth option should be chosen to let returns compound in such funds. 

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