A Mutual Fund generally offers two plans for every scheme: Dividend and Growth. Under the Dividend plan,


A Mutual Fund generally offers two plans for every scheme: Dividend and Growth. Under the Dividend plan, the fund distributes gains made from investments to investors, from time to time. In the Growth plan, all gains made by the fund are retained by it in the scheme.

An investor has the option of receiving the dividend payment or opting for reinvestment of the dividend amount. In the dividend reinvestment option, the investor gets dividend in the form of units (i.e. dividend declared gets converted into units — reinvested into the same scheme). We discuss some queries investors have on dividends.

What is the Dividend Sweep facility?

This is a facility some Funds offer for some schemes. Under this facility, unit holders can opt to sweep or invest the dividend earned in a scheme into any other open ended scheme.

In any scheme under dividend reinvestment, the dividend amount is reinvested in the same scheme in which dividend was declared.

Under this facility, the dividend is reinvested into another scheme of the Mutual Fund. The Key Information Memorandum contains details of the facility, if available, including minimum amount of dividend for sweep.

I invested Rs 20,000 in a scheme at NAV of Rs 40 and the declared dividend was 50 per cent for the scheme. However, I received Rs 2,500 as dividend. Please explain this.

Please note that dividend is declared at Face Value of the Units, i.e. on Rs 10. If dividend declared is Rs 5 per unit, it would mean it is 50 per cent of the face value of Rs 10. The investment being for 500 units (20000/40), you have received Rs 2,500 at Rs 5 per unit.

I had invested in a tax-saving scheme (ELSS) three years ago and have opted for dividend reinvestment. Dividends have been reinvested every year.

However, I am unable to redeem the reinvested dividends as the Mutual Fund says that the reinvested dividend is still under lock-in. Why is this so?

Every time dividend is reinvested, it is similar to a fresh investment being made by you in the ELSS. For example, if you invested in March 2009 and a dividend was declared and reinvested in March 2010, the reinvested amount would be taken as a fresh investment in March 2010 and the Units would be locked-in for three years.

Every subsequent dividend would thus be locked in. Regarding the reinvested dividend, you can redeem the same after three years from the date of reinvestment.

If you do not wish dividends to be reinvested, you may change the dividend option to payout by giving a simple request letter to the Fund, duly signed by the Unit Holder(s). Please mention the folio number and scheme in your letter requesting the change of dividend option from reinvestment to payout. Once the option is changed, future dividends will be paid out to you.

I have lost track of the dividends declared and received. How can I check the same?

You may request a complete account statement since inception, i.e. since your first purchase in the scheme. The statement will give details of all transactions since inception, including dividends paid out. You may then reconcile with the cheques received or with your bank account for credits received.

If you have not received the same, you may inform the concerned Fund to check if any dividend warrant was returned undelivered or any credit that may not have taken place.

Some Registrars and Funds also have a provision on their Web site to check for dividend warrants returned undelivered in their folios.

Investor may register their IFSC Code in their folios and opt to receive dividends by way of electronic payout to ensure that no dividend cheque is retuned back undelivered to the Fund.

(Contributed by CAMS Viveka, an Investor Education Initiative from CAMS. Views expressed are general practices in the MF industry and may vary on a case-to-case basis.)


Use mutual fund proceeds for children's education
Hindu Business Line
I draw a net salary of Rs 90,000. My monthly expenditure including rent is Rs 30,000. My savings: RD - Rs 25,000, PF - Rs 9,500 and SIPs of mutual funds - Rs 20,000. The current value of my investments in MFs is Rs 8 lakh. I have fixed deposits of Rs ...
See all stories on this topic »

Hindu Business Line
Srei Mutual Fund to raise $ 500 million
Economic Times
KOLKATA: Srei Mutual Fund plans to mop up around $ 500 million through its infra-structure debt fund. Since minimum subscription for the fund is Rs one crore, this infrastructure fund will focus on large investors. "We will be targeting Q4 FY 2012 - 13 ...
See all stories on this topic »
Tata Mutual Fund picks bank, IT; drops oil & gas, utilities
Moneycontrol.com
Tata Mutual Fund has enhanced its exposure in banking & financial services, information technology and consumer non-durables sector, while decreased its weightage in oil & gas, utilities and pharmaceuticals space. Source: Moneycontrol.com ...
See all stories on this topic »

Moneycontrol.com
FAQs on dividends
Hindu Business Line
Mutual Fund generally offers two plans for every scheme: Dividend and Growth. Under the Dividend plan, the fund distributes gains made from investments to investors, from time to time. In the Growth plan, all gains made by the fund are retained by it ...
See all stories on this topic »

Hindu Business Line
Equity NAVs plunge led by poor market performance
Moneycontrol.com
Equity Mutual Funds yet again closed with negative returns as markets plunged by over 1 per cent in yesterday's session. Debt Funds, on the other hand, were seen in green. Source: Moneycontrol.com ...
See all stories on this topic »

Moneycontrol.com
'Target-date' mutual funds: Oops, they glide the wrong way
Dallas Morning News
Some ideas give us comfort and security. They're also easy to market because we all like comfort and security. That's one reason “target-date” mutual funds have been the big idea in 401(k) plans since they were introduced about 20 years ago. Today ...
See all stories on this topic »
What SEBI tweaks mean for investor
Business Line
SEBI has unleashed a new set of guidelines for the Mutual Fund industry, applicable from last month. Here is what they mean to investors. One Plan only: Now there is no confusion as to which plan to invest in — Regular/Institutional/Super ...
See all stories on this topic »

Business Line
Growth option multiplies returns
Hindu Business Line
I am 33 years old and have two daughters aged two-and-a-half years and six months. Currently, I am investing Rs 34,000 per month in SIPs for long-term goals with investment horizon of more than 20 years. The SIP composition is as follows: Quantum Long ...
See all stories on this topic »
NAVs decline as markets ended lower
Moneycontrol.com
Equity Mutual Funds closed with negative returns as markets plunged owing to increasing concerns looming over US fiscal, weak global economic growth and geo-political tensions in Middle East. All the major equity categories like Large Cap, Small & Mid ...
See all stories on this topic »

Moneycontrol.com
Active Funds Come Out of the Closet
Barron's
Active share is a measure of the portion of a mutual fund's holdings that differs from its benchmark index. In other words, it's a measure of how actively managed your actively managed fund is. Stated as a percentage of the fund's holdings, it takes ...
See all stories on this topic »

Comments

Popular posts from this blog

Airplane Parts and Functions

Water Melons Management Story