Lux Investing

In Mutual fund investment, what difference it makes, when one choose dividend option as re invest or growth ?

Public Comments

1. It can make a very big difference particularly over the long term. Example - Lets say you invest $100,000, your fund returns say 20% annually and you take the interest out each Christmas. After ten years you will still have your $100,000 and will have taken out $200,000 (20% of 100,000 times ten years). So your total in both income and capital at the end is $300,000. Now, if you left your interest in the fund till the end and allowed it to compound (that means earn interest on the interest) you will have a total of nearly $620,000 (100,000 compounded at 20% over ten years). The catch is of course you will have no income for ten years whereas in the first scenario you will. If however you do not need the income you can see that it makes a massive difference to the end result. Hope this helps, Jackson.