Lux Investing

when investing in mutual funds, (equity based) which is a safer option? dividend or growth option?

Public Comments

1. Dividend Option gives you timely dividends (depending on fund manager when he feels it right), so you get some amount back....it has two options; re-investment and pay out...with re-investment you can reinvest the money and get some more units and in payout you get money as dividend. In Growth option your NAV goes on increasing, as no dividend is declared. Past Records have shown that Growth options is better if you invest in equity and that for a longer period of time.
2. if u want to invest in equity segment.....then why to go for mutual fund....i my opinion u should directly invest in equity becoz rate of return by investing in equity is more than investing in mutual fund.....
3. People usually use "safer" to mean "lower volatility." Dividend paying companies tend to be more mature and with a clearer future earnings picture. Stock prices are based on forecasts of future earnings. Since there are fewer big surprises about the future earnings picture for mature companies, dividend paying companies tend to have lower share price volatility.
4. Mutual funds are better for most people unless you have the time & expertise to research stocks. Dividend/Income funds generally a bit safer but in rising interest rate environments may not be so.
5. Mutual funds that invest in dividend paying stocks are considered a much safer investment. In a market downturn, growth stocks tend to drop in price significantly more than dividend paying stocks. However, in up markets growth stocks will generally speaking outperform dividend paying stocks but not always. Over the last 5 years, dividend paying stocks have beaten the pants off of growth stocks.
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7. In general, dividend mutual funds are more stable than growth oriented mutual funds. The key however is to pick funds (dividend or growth) that have solid performance over a long period of time. Good luck.