What happens to the dividend that company declare for mutual fund investors. Is it reinvested by fund houses

Ans: When a company declares dividends, mutual fund investors receive these dividends in the form of dividend payouts or reinvestments, depending on the mutual fund's dividend policy.

If you're invested in a dividend reinvestment plan (DRIP) mutual fund, the dividends declared by the companies in which the fund invests are automatically reinvested back into the fund. This means that instead of receiving cash payouts, the dividends are used to purchase additional units of the mutual fund at the prevailing net asset value (NAV).

On the other hand, if you're invested in a dividend payout mutual fund, the dividends declared by the companies are distributed to investors in the form of cash payouts. These payouts can be either credited directly to your bank account or reinvested in additional units of the mutual fund, depending on your preferences and the options provided by the fund house.

Fund houses typically provide investors with the flexibility to choose between dividend reinvestment and payout options based on their investment objectives and preferences. It's important to review the dividend policy of the mutual fund and understand how dividends are handled before making investment decisions.

In summary, the treatment of dividends in mutual funds depends on the fund's dividend policy and the investor's preferences, with options for reinvestment or payout.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in