Know more on Growth and Dividend Option

Growth-or-Dividend

There are different kinds of mutual fund options available in the market. Every mutual fund scheme you choose will have two options: growth or dividend option. You can differentiate them based on their Net Asset Value (fund’s per share market value). Always remember, the various factors such as the behavior, objective, fund manager are all the same but the performance and results delivered are different.

Growth Options:

Under the growth options, you have to stay invested for a longer period to see the growth. The returns you earn are not realized immediately. You will not receive any payment in the form of dividends. The returns are realized only when you sell the units. The NAV on the date of the investment will be your cost price and the NAV on the date of sale becomes a selling price. The difference will be your returns.

The profit your funds make remains in the market and you get the benefit of compounding over the years. The number of units you buy remains the same, but the price or NAV keeps going up. It best suits for the investors who don’t need an income from their investments today but are targeting a corpus for future use.

Dividend Options:

The dividend options allow you to book profits periodically. This option is good for investors who need periodic income from their investments. The amount of dividend is not certain. When the NAV reaches a certain level, the fund house pays out the dividend. The dividend-reinvestment is different from your dividend options. In the dividend reinvestment option, profits are booked, but instead of declaring a dividend, the fund’s house buys more units at the current price. So your number of units goes up but the NAV remains the same.

Which option is best to choose?

This depends on factors like your investment objective and tenure. For Equity Mutual Funds, the growth option would be the best because you can make compounding earnings. If you plan to invest in the short term, Debt mutual funds will be the best. For short term investment in debt funds, you can go for a dividend option.
Thus,

  • Long-term needs: Equity Mutual fund with growth option is better.
  • Short-term needs: Debt Mutual funds with dividend option is advisable.
  • Mid-term needs: Debt Mutual funds with growth options can be better.

Finity

You can invest in hand-picked funds through Finity– India’s most trusted Mutual fund app for Direct Plans.

So start investing in Mutual funds to make your dreams come true.

Mutual fund

Why should I shift from Regular Plans to Direct Plans Mutual Funds?

Usually, when we place orders online we come across two products, those that don’t charge for delivery and the other that charges for the same. We normally opt or like the ones that are “Delivery Free”. Right?

The simple reason being we do not incur additional charges for our purchase and that reduces the burden of our expenses. Even Direct Plans and Regular Plans of Mutual Funds work on a similar concept.

Regular Plans are mutual funds that you buy through an intermediary such as an advisor, distributor or broker. These agents charge commission, trail or distribution fee for the service they provide, so the total expenditure for your investment is high. And not always do brokers or intermediaries intent to sell plans that suit your financial needs, their primary objective would be to push the scheme and earn their share of profit.

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Direct vs Regular

How Do Direct Plans Help you Earn More?

Usually, when we place orders online, we come across two products: those that don’t charge for delivery and the others that charge for the same. We usually opt or like the ones that provide “Free Delivery.” Right? The simple reason being we do not incur additional charges for our purchase, and that reduces the burden of our expenses.
Even Direct Plans and Regular Plans of Mutual Funds work on a similar concept. Let’s take a closer look.

Regular and Direct Plans: An Introduction

Regular Plans are mutual funds that you buy through an intermediary such as an advisor, distributor, agent, or broker. These agents charge commission, trail, or distribution fee for the service they provide, thus increasing the expenditure for your investment. And not always do brokers or intermediaries intent to sell plans that suit your financial needs, their primary objective would be to push the scheme and earn their share of profit.

Now let’s look at funds that are like the delivery of free online products.
SEBI made new regulations with regards to Mutual Funds, which was made effective on January 1, 2013, i.e. Introduction of Direct Plans. Direct Plans are those mutual funds in which investors can directly invest with Asset Management Companies (AMC) who do not involve intermediaries and do not charge any agent or broker fees.

How Are Direct Plans More Beneficial?

We are aware now what the difference between Regular and Direct plans. But what makes Direct plans more convenient for investments. Let’s find out:

  • Direct Plans do not involve intermediaries, and hence, Fund Managers can generate better returns by reducing their expense ratio.
  • The Net Asset Value (NAV – per share market value of a fund) is more when compared to Regular Plans implying that the returns that you can make are higher by approximately 0.5% for equity funds and 0.2% for debt funds.
  • Investors can earn 1-1.5% more returns with Direct Plans. Additionally, a difference of 1% can be a huge gap with the compounding effect in the long-term.

Let’s look at a simple example:

An investment of 2 lakhs in each Direct, as well as Regular plans for 20 years, yield different returns.

 

Direct Vs Regular

Direct Plans offer 42.2 lakhs, which means the investor is entitled to 16.5% returns, whereas Regular plans help you earn 32.7 lakhs, which are approximately 15% returns. This is a clear example that the Direct Plan is more beneficial and hassle-free than Regular Plans.

 Direct Plans = Higher Returns

However, each investor’s risk appetite is different, and so is their knowledge or expertise about Mutual Funds. So if you are a newbie to investing and have no prior knowledge of mutual funds, then you can opt for Regular Plans, initially. However, once you have gathered enough experience and expertise, it’s highly recommended that you quickly switch to Direct Plans for the above-mentioned reasons.

Think Smart! Think Investments!

Now invest via UPI on Finity

We wanted to share an exciting update with you. In our effort for making the payment experience superior, we have introduced UPI as a payment option on Finity. Here is how it works:

  • Install Finity app, finish paperless KYC in 5 minutes and choose Top Rated Mutual Funds to invest in.
  • You need to have a VPA (Virtual Payment Address) for your bank account. Once you choose UPI as a payment option, you will be promoted to enter your VPA.
  • A payment request will be sent to your native UPI app (e.g. BHIM, Google Pay, any bank’s UPI app, etc.) and you will receive a notification about the payment request.
  • Pay from the UPI App and return the Finity app.
  • Your transaction is successful and you can track the same in the reports section.

We know the value of hard-earned money, and we guarantee absolute peace of mind on your purchases. Signup now to start investing in Direct Mutual Funds, Term Insurance and National Pension System (NPS).

Happy investing!

Accomplish more with Finity’s Advanced Research Reports!

We are excited to announce the launch of our newest feature – Advanced Research ReportsThese reports are the perfect companion for investors to take a well-informed decision, and make the best returns from investments.

Key highlight:
Portfolio Analysis

  • Detailed analysis of the fund’s portfolio and sector exposure.
  • Check out top holdings and more.

Performance Analysis

  • Return analysis across multiple investment periods.
  • Index VS Fund Growth

Risk Analysis

  • Category Risk and Return matrix
  • Various other risk indicators like alpha, beta and more.

We hope that you will like this new feature of your Finity app, and make the best out of it. Click here to download Finity app to start investing in Direct Mutual Funds, Term Insurance and National Pension System (NPS).

Alternatively you can signup online to start investing:

Advanced Research Report

ZERO COMMISSION. ZERO FEE. ZERO PAPERWORK.

 

 

 

India’s most trusted app for Direct Mutual Funds!

Dear Customer,

Tired of giving away money to the broker (commission) with Regular mutual funds? Welcome to Finity – India’s Most Trusted App for Direct mutual funds that offer commission-free Direct mutual funds

Make the best lifetime investment decision with Finity, and here is how?

  • Invest in Finity’s recommended funds: These recommendations are from our experts and especially curated for you to ensure long-term wealth creation.
  • Do It Yourself: Make your own investment decisions by evaluating performance, risk, portfolio allocation across all Direct mutual funds.

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