You must have heard experts saying how amazing it is to invest in a dividend mutual fund. But the question that pops up here is- is this option fit for your financial goals? Understanding this, would first require you to be familiar with the concept of dividend mutual fund is.
What are dividend mutual funds?
Dividend mutual funds are effectively stock mutual funds that make investments chiefly in companies that pay dividends. For people who don’t know what dividends are, they are profits that business organizations distribute among their stock shareholders.
Investors can accept their dividend in the form of income or can buy further stocks with these earnings. The majority of investors having their money stashed in such funds want the dividend to act like a steady source of income for them. That means, they are more interested in receiving their dividend from their mutual fund company as regular payouts.
And because dividend funds make for a great source of constant income, they are best suited to people who are retired. Also, they are far less risky than other fund types like growth stock mutual funds.
Dividend mutual funds pay dividends even in economic environments where bond mutual funds generally fail to offer impressive returns. For instance, when the market is favourable but the interest rates are low, bonds fail to offer good yields whereas dividend mutual funds don’t disappoint their investors.
HDFC’s Consisted Dividend Paying Funds have been devised with a view to offering similar advantages as mentioned above, and are sure to act as a consistent flow of income for you.
Below, you find a figure that enlists four amazing dividend paying mutual fund options by HDFC, each has separately been discussed below-
Source: Swaraj Wealth Research
- HDFC growth fund- dividend option- The main objective of this scheme is long term capital appreciation. Investments are mainly made in equity and equity linked instruments.
- HDFC equity fund-dividend option– This open-ended dividend scheme also aims at achieving capital appreciation.
- HDFC capital builder fund- dividend option- Like the above two options, HDFC capital builder fund also tries to achieve capital appreciation over the long run.
- HDFC premier multi-cap fund- dividend- This scheme tries to generate long term capital appreciation by making investments in a varied portfolio of large and mid cap blue chip companies.
Now, let’s analyze the performance of these funds from the illustration above. If we look at the total dividend offered per unit by each of the enumerated schemes, we will see that HDFC equity fund-dividend option plan stood out in the year in 2013, while HDFC premier multi-cap fund- dividend, happened to be the least impressive performer.
Again In 2014, HDFC equity fund-dividend option topped the list with the highest dividend offering, while HDFC premier multi-cap fund- dividend remained the laggard.
Talking about the total dividend for the years 2015, 2016 and 2017, we see that the trend remains unchanged- while HDFC equity fund-dividend option continued to be the leader, HDFC premier multi-cap fund- dividend failed to show any impressive performance through this stretch of time.
Between the other two schemes remaining viz. HDFC growth fund- dividend option and HDFC capital builder fund- dividend option, the former could be a cleverer choice for investors considering it performed better than the latter in almost all of the mentioned years except 2016, when the latter outdid the former by 0.25 Rs/unit, and in 2017, when the performances of both the schemes remained comparable.
Now, that you have so many amazing HDFC dividend options to make investments in, why look for anything else?