Mutual fund dividends are normally not declared or paid at any pre-determined date or time. Mutual fund trustees decide to pay out dividend with varied considerations at different times. However trustees try to declare dividends regularly.

Mutual fund units have net asset values and when dividend is paid out these net asset values reduce for every unit. Therefore, unlike shares, dividends are not extra gains but enjoyment of your unit's progress with suitable reduction of net asset value after dividend payment. In case of debt or income funds dividend distribution also entails a tax. Even this tax is reduced from your unit's net asset value.

In an open ended fund, you can always withdraw any part of your unitholding as you please. Since dividend involves a tax in some cases, it is advisable to avoid receiving dividends but to withdraw a part of your unitholding in such cases.

Opting for a dividend option also involves re-investing the dividend received if you do not need the extra cash. In that case there is a likelihood of your dividend payout remaining uninvested for some time.

If you have opted for growth option of a fund, you will not receive any dividends. You can only withdraw partly or fully your unitholdings in the Scheme.

In a dividend paying scheme fund performance has to take into account not only the growth in net asset value but also the distributed dividends.

If you are looking for useful information on Mutual Fund Investing in India in order to:

• consider if mutual fund investing is suitable for you
• learn about responsible ways of investing in mutual funds (rather than following stray advice from friends, relatives or interested brokers and agents)
• consolidate your knowledge on mutual fund investing essentials

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