Mutual Fund investment is on the rise these days. Investor have become aware about the capital market. Looking for a better yield and capital protection has led them to invest in the capital market. Mutual Fund is one of the easiest ways to get introduced to it. The most common issue an investor faces, while investing in the mutual fund is whether to invest in growth or dividend option. In the case of Growth option, the investor will not receive any dividend on the contrary, the mutual fund will allow the owner to reinvest those money into the mutual Fund. But in the case of dividend option of a mutual fund scheme, the dividend will be paid to the investor on a quarterly, half-yearly or annually basis. This generally varies from one scheme to another and most of the mutual funds pay their dividend on the fixed time or due date but it is not always guaranteed. There are mainly two types of Dividend mutual fund based upon the asset class:
- Dividend Yielding Mutual Fund (Equity)
If any dividend fund invests more than 65% of their assets in the equity, then it will be classified as Dividend Yielding Mutual Fund (Equity).
- Dividend Yielding Mutual Fund (Debt)
If any dividend fund invests more in debt compared to the equity, then it will be classified as Dividend Yielding Mutual Fund (Debt).
For an investor, investing in dividend fund gives various benefits. One of the most common benefits that an investor gets is tax free returns on the dividend. It helps in minimizing the market volatility risk and act as hedging against any market turmoil. For a retail investor, the stream of high dividend income allows steady cash flows in the form of regular dividend income. Let’s look at some of the top best dividend paying mutual fund, according to Paytm:
- UTI Dividend Yield Fund Direct-Growth
- ICICI Prudential Dividend Yield Equity Fund
- Quantum equity fund of funds Direct Dividend Reinvestment
- Reliance Growth Fund Direct- Dividend
An investor before investing in dividend yield funds, should keep a few points in mind. For an early and conservative investor, one should opt for the large-cap mutual fund. If any investor invests in mid cap or small cap fund, then it will defeat the purpose of his investing as they carry much risk compared to the large cap. One should also avoid funds with a very small corpus size. They also keep up in mind that these funds tend to underperform the growth fund in rising markets.
An aggressive investor who is looking for a higher return and having a larger risk appetite must avoid these funds. Before investing, one must also look upon the rating of the fund at the rating agency website and see the category to which fund belong. Finally, theyshould also compare the fund with the other funds in the same category. Also, an investor should also look upon fund historical performance as it will provide him a glimpse of their return over various market whether its bull or bear.
If you are looking to invest in mutual funds, hop on to www.gulaq.com or you can talk to the experts.
*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Source: https://www.gulaq.com/5-best-dividend-paying-mutual-funds/
