Never Chase Dividends....

DIVIDENDS!!!!!.. We do have a craze for Dividends, Increments, Rewards and Bonus. But beware, Never Opt a Mutual Fund Scheme for it Dividend declaration Record alone. This is because of the following : -

1. Dividend is a part of a same cake : Say a MF scheme's NAV climbs from Rs 10/- to Rs. 20/- over a period of time. A dividend of Rs 5/- (50%) is declared because of which the NAV of the scheme on the record date drops to Rs. 15/-.
2. Cheap NAV : Dividends are frequently declared by some of the MF to eventually attract retail investors by projecting cheaper NAVs on Post-Dividend stage.
3. Huge Fund Size : MFs with huge fund inflow are scared of the fund size hence decide to chunk out heap of cash out of the fund in the form of Dividend to get the fund size under control.

Thus it is advisible to pick a fund based on 3 to 5 year CAGR (Compounded Anual Growth Rate) record instead of following Dividend Record alone.

Hence GROWTH Record and not DIVIDEND Record alone that MATTERS!!!