Skip to main content

Dividend money from Mutual Funds or Stock dividends

 

   Major mutual fund houses have been paying out dividends, especially on investments in equity and balanced fund categories. The gains netted by a mutual fund scheme are reinvested in the fund with the growth option. On the contrary, in a scheme with the dividend payout option, the gains are periodically distributed as dividend. Consequently, the NAV falls to the extent of the dividend paid out. A good dividend payout in uncertain markets will reassure investors and encourage them to stay invested longer.


   How efficiently can the recent harvest of dividends be used by small investors? Can this haul be made to work harder for you? This largely depends on an investor's liquidity needs, financial constraints and risk appetite. The money can be used to clear unpaid dues, saving for contingency fund and meeting other personal financial obligations.
   
Some investment options for dividends you can explore:

Fixed maturity plan    

They are predominantly debt-oriented schemes floated by fund houses. Their main objective is to generate steady returns over a fixed maturity period by investing in debt and money market instruments. Based on the investment tenure, they invest in a range of debt products of similar maturity dates.


   Taxed at 10 percent without the indexation and 20 percent with indexation, it is an option that investors in the high tax bracket must consider. By way of indexation, inflation is taken into account when computing tax liability.

Fixed deposit    

In the current high interest rate regime, the returns on fixed deposits are a lucrative 9-9.5 percent per annum. For those in the lower tax bracket, this is a safe bet. However, investors in the higher tax bracket need to shell out 30.90 percent of their earnings. This is less risky in comparison to fixed maturity plans and the returns are guaranteed compared to the latter.


   With a high degree of safety and ample liquidity, the sheen on fixed deposits has reappeared as global uncertainties are adding to turbulence in the equity waters. Fixed deposits still remain the favorite of risk-averse investors who seek to augment wealth for their children's education, marriage, buying a house or for contingencies like medical emergencies.

Rebalance portfolio    

Perhaps it is time to consider rebalancing your portfolio. Rebalancing involves periodically resetting the proportion of each asset class back to its original allocation percentage. Suppose an investor seeks 60 percent of the investments in equity and 40 percent in debt in line with his risk appetite. Over a period of time, let us assume the percentage of investments in debt fell to 30 percent owing to profits in equity investments that grew to 70 percent. This portfolio is not in sync with the investor's risk appetite and initial allocation.


   While rebalancing, investors sell asset classes that have risen in value and buy other asset classes that have dipped. Investors can potentially increase returns when they are selling high and buying low during rebalancing.


   So, if you have no unpaid debts and other pressing financial commitments, your dividend money can be better used in one of these investment options.

 

-----------------------------------------------------------------

 

Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in L&T Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Popular posts from this blog

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...
Read more

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...
Read more

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...
Read more

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...
Read more

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now