Investing in Mutual Funds - Types of Mutual Funds

Summary

This video script provides an in-depth exploration of various mutual fund schemes offered by different fund houses, categorized by organizational structure (open-ended, close-ended, and interval funds) and investment portfolios (equity, debt, and hybrid funds). It discusses the pros and cons of each type, alongside special options like ETFs, ELSS, and gold funds. The script highlights key considerations like expense ratios, entry/exit loads, and fund management strategies, advising new investors on fund choices based on risk tolerance, investment goals, and time horizons.

Takeaways

• 📊 Mutual fund schemes are categorized by organizational structure (open-ended, close-ended, and interval funds) and investment portfolio (equity, debt, and hybrid funds).
• 🔄 Open-ended funds allow continuous investment and redemption, offering flexibility to investors.
• ⏳ Closed-ended funds have fixed maturity periods, with limited buying opportunities during the New Fund Offer (NFO) and require trading on stock exchanges.
• ⏲️ Interval funds combine features of open- and closed-ended funds, allowing investments and redemptions at specified intervals.
• 📈 Equity funds invest in stocks, offering higher returns but with higher market risk, while debt funds invest in fixed-income securities, providing lower risk and more stable returns.
• ⚖️ Hybrid funds invest in both equities and debt, balancing growth potential with risk management, and are further categorized into equity-oriented, debt-oriented, and balanced funds.
• 💼 Sectoral and thematic funds focus on specific industries or sectors, such as technology or pharmaceuticals, offering targeted exposure.
• 💸 Expense ratio is a crucial factor for mutual fund investors, as higher expenses reduce overall returns. It’s calculated as a percentage of the fund's average net asset value (NAV).
• 🚪 Exit loads are fees charged when investors redeem their investments too early, while entry loads are rarely applied today.
• 🌱 Growth options reinvest earnings back into the fund, leveraging compounding, while IDCW (Income Distribution cum Capital Withdrawal) options distribute earnings regularly as dividends.

Q & A

What are the two main criteria used to categorize mutual fund schemes?

The two main criteria used to categorize mutual fund schemes are organizational structure and investment portfolio.

What are the three types of mutual funds based on organizational structure?

Mutual funds based on organizational structure are classified into three types: open-ended funds, close-ended funds, and interval funds.

What is the key feature of open-ended funds?

The key feature of open-ended funds is that they allow investment and redemption at any time, offering flexibility to investors.

What is the difference between closed-ended funds and interval funds?

Closed-ended funds have a fixed maturity period and allow investment only during the New Fund Offer (NFO) period, while interval funds permit investment and redemption only during specific intervals, such as monthly or quarterly.

What are the three primary categories of mutual funds based on their investment portfolio?

Based on the investment portfolio, mutual funds are categorized into three primary types: equity funds, debt funds, and hybrid funds.

What is an Equity Fund, and what level of risk does it carry?

An Equity Fund primarily invests in stocks or equities of companies. It offers the potential for higher returns but comes with a higher level of risk due to market fluctuations.

What is the main objective of debt funds?

Debt funds invest in fixed-income securities like government and corporate bonds. Their main objective is to provide regular income and generally carry lower risk compared to equity funds.

What are hybrid funds, and how do they balance risk and return?

Hybrid funds, also known as balanced funds, invest in a mix of equities and debt securities. They aim to balance risk and return by diversifying across asset classes, offering more stability compared to pure equity funds.

What are large-cap, mid-cap, and small-cap funds?

Large-cap funds invest in established companies with large market capitalizations, offering stable but lower returns. Mid-cap funds invest in medium-sized companies, balancing growth potential and risk. Small-cap funds target smaller companies with higher growth potential but also higher volatility and risk.

How does the expense ratio affect an investor's returns in mutual funds?

The expense ratio represents the annual cost of managing a mutual fund as a percentage of the fund's average net asset value (NAV). A higher expense ratio reduces the overall returns for investors as it covers the fund's operating and management expenses.

Outlines

00:00

💡 Overview of Mutual Fund Categories and Structures

This paragraph introduces the two main criteria for categorizing mutual funds: organizational structure and investment portfolio. Organizational structure divides funds into open-ended, close-ended, and interval funds. Open-ended funds allow investments and redemptions anytime, while close-ended funds have fixed maturity periods, and interval funds accept investments at specific intervals. The paragraph also categorizes mutual funds based on investment portfolios into equity funds, debt funds, and hybrid funds. Additional schemes like ETFs, ELSS, and gold funds are briefly mentioned.

05:01

📊 Types of Equity Funds: Large, Mid, and Small Cap

This paragraph explains different categories of equity funds based on market capitalization. Large-cap funds invest in well-established companies, offering stability with moderate returns. Mid-cap funds balance growth and risk, targeting medium-sized companies, while small-cap funds focus on smaller companies with higher growth potential but increased volatility. Multi-cap funds are also discussed, which allow investments across various market capitalizations. Additionally, sectoral funds target specific industries like technology or banking. The paragraph advises aligning investment goals and risk tolerance with the appropriate fund category.

10:02

💼 Exploring Debt Funds: A Low-Risk Investment Option

The paragraph delves into debt funds, which are preferred by investors seeking lower-risk options. Debt funds invest in fixed-income instruments like government bonds and corporate securities. Types of debt funds discussed include liquid funds (short-term, up to 91 days), ultra short-term funds (3-6 months), and fixed maturity plan funds. Guild funds invest in government securities, while dynamic bond funds adjust to changing interest rates. The paragraph emphasizes that debt funds are suitable for conservative investors, such as seniors or those with short-term financial needs.

15:04

⚖️ Hybrid Funds: Balancing Risk and Returns

This paragraph discusses hybrid or balanced funds, which invest in both equity and debt instruments, offering diversification and a mix of growth and stability. Hybrid funds are categorized into equity-oriented (65-80% in equities), debt-oriented (70-80% in debt), and balanced funds (a more even mix). These funds are ideal for investors seeking moderate risk and returns, and the allocation between equities and debt depends on market conditions. The paragraph highlights the diversification and risk mitigation benefits of hybrid funds compared to pure equity funds.

20:05

💰 Expense Ratios: Understanding the Costs of Mutual Funds

This paragraph explains the concept of the expense ratio, which represents the annual cost of managing a mutual fund as a percentage of the fund's average net asset value (NAV). The expense ratio covers administrative, marketing, and management costs. A higher expense ratio reduces investor returns, so funds with lower expense ratios are generally preferred. The calculation of expense ratios and their impact on investment returns is detailed, and the importance of considering this alongside other factors like historical performance is emphasized.

25:07

📈 Growth vs. IDCW: Choosing the Right Mutual Fund Option

This paragraph compares two mutual fund options: growth and IDCW (Income Distribution cum Capital Withdrawal). In the growth option, earnings are reinvested, allowing the investment to grow over time due to compounding. In contrast, IDCW distributes a portion of earnings to the investor periodically, resulting in a lower NAV. The choice between these options depends on financial goals, risk tolerance, and investment horizon. For long-term wealth accumulation, growth options are recommended, while IDCW suits those seeking regular income, such as retirees.

Keywords

💡Open-ended funds

Open-ended funds are mutual funds that allow investors to buy and sell units at any time. They offer flexibility, as investors can continuously invest and exit whenever they wish. In the script, they are recommended for new investors due to their convenience and accessibility.

💡Closed-ended funds

Closed-ended funds have a fixed maturity period, and investments can only be made during the initial offer period. After this, investors can buy or sell units only on the stock exchange. The script mentions that the liquidity of such funds is typically low, making them less flexible compared to open-ended funds.

💡Equity Funds

Equity Funds primarily invest in stocks or equities of companies. They offer the potential for higher returns but come with higher risks due to market fluctuations. The script categorizes Equity Funds further into types like large-cap, mid-cap, and small-cap funds, based on company size and market capitalization.

💡Debt Funds

Debt funds invest in fixed income securities such as government and corporate bonds. These funds aim to provide regular income and are generally considered lower-risk investments compared to Equity Funds. The script suggests debt funds for conservative investors seeking steady returns with minimal risk.

💡Hybrid Funds

Hybrid funds, also known as balanced funds, invest in a mix of equities and debt securities. This strategy helps balance risk and returns by diversifying across different asset classes. The script emphasizes that hybrid funds offer both growth potential from equities and stability from debt instruments.

💡Expense Ratio

The expense ratio is the annual fee charged by a mutual fund to cover administrative and management costs. It directly impacts an investor’s potential returns, with higher expense ratios reducing overall returns. The script advises investors to consider funds with lower expense ratios for better long-term results.

💡Net Asset Value (NAV)

NAV represents the value of a mutual fund’s assets minus its liabilities, divided by the number of outstanding units. It's a crucial metric for assessing the performance of a mutual fund. In the script, NAV is used to compare growth and IDCW options in mutual funds, affecting the returns distributed to investors.

💡Large-cap funds

Large-cap funds invest in established companies with large market capitalizations, such as ITC, TCS, and SBI. These funds offer stability and conservative returns, as the companies are already well-developed. The script mentions them as suitable for investors looking for lower-risk, stable investments.

💡Small-cap funds

Small-cap funds invest in smaller companies with higher growth potential but come with increased risk and volatility. The script notes that while small-cap funds can provide high returns, they require long-term holding (7 to 10 years) to mitigate risks and achieve better returns.

💡Entry Load & Exit Load

Entry load is a fee charged when investing in a mutual fund, and exit load is a fee applied when redeeming or selling units. The script explains that entry loads are mostly obsolete, but exit loads are still used to discourage short-term withdrawals and vary depending on the duration of investment.

Highlights

Introduction to mutual fund schemes based on organizational structure and investment portfolio.

Three types of mutual funds based on organizational structure: open-ended, closed-ended, and interval funds.

Open-ended funds offer flexibility, allowing investments and redemptions at any time.

Closed-ended funds have fixed maturity periods, while interval funds allow investments during specific intervals.

Mutual fund schemes categorized into three types based on the investment portfolio: equity, debt, and hybrid funds.

Equity funds invest in stocks, offering higher returns with higher risk due to market fluctuations.

Debt funds invest in fixed-income securities like government bonds, offering regular income with lower risk.

Hybrid funds balance risk and return by investing in both equities and debt securities.

Categories within equity funds: large-cap, mid-cap, small-cap, and multi-cap funds.

Sectoral funds focus on specific sectors like technology or banking, catering to different risk profiles.

Debt funds are preferred by low-risk investors and those seeking short-term investment options.

Liquid funds, ultra short-term funds, and dynamic bond funds are examples of debt fund options.

Hybrid funds are popular among investors for diversification and reduced volatility compared to equity funds.

Expense ratio is a key factor to consider, as higher expenses can reduce potential returns from mutual funds.

Growth option vs. IDCW (Income Distribution cum Capital Withdrawal) option: growth reinvests profits, while IDCW pays regular dividends.

Investors should choose between growth and IDCW based on long-term goals, risk tolerance, and investment horizon.

Transcripts

let's explore the array of mutual fund

schemes offered by various mutual fund

houses

these schemes can be categorized into

two main criteria

the first is organizational structure

and second is Investment Portfolio

organizational structure classifies the

mutual fund into three types open-ended

fund close-ended and interval funds

open-ended funds allows investment and

Redemption at any time closed ended

funds have fixed maturity periods and

interval funds permits investment during

specific time intervals of course we

will discuss this in detail in next few

slides

based on the Investment Portfolio

means the type of investment the mutual

fund has got visual fund schemes fall

into three primary categories the first

is Equity Fund date fund and hybrid

funds

apart from these there are other

interesting mutual fund schemes

available in the market such as exchange

traded funds called as ETFs Equity

linked saving schemes these are the

tax saving schemes called as elss and

gold funds which invest in gold this

this unique offering will be briefly

this lecture

the open-ended fund schemes allow

investors to buy and sell units at any

time offering flexibility open-ended

funds continuously accept new investment

and provide the option to exit wherever

or whenever an Investor's desires

closed ended funds have fixed maturity

period investor can only invest during

the new fund offer nfo period after that

units can be bought or sold on Stock

Exchange but the fund is

liquidated at predetermined date so you

cannot invest in closed ended fund at

any point of time of course you have you

can

buy or sell it but you have to do it in

the stock market where the liquidity of

such points is very less

the next is called as interval funds

interval funds combine features of open

and closed funds they accept investment

at specific intervals such as monthly

quarterly or annually while allowing

Redemption only during

pre-defined intervals so you cannot buy

it or redeem it whenever you want

so most of the investors prefers

open-ended funds primarily as they allow

investment at any point of time

so being a new investor I would suggest

you to go for open-ended funds as you

become a seasoned investor you can go

for close rated funds or interval

type of funds

the next is uh Equity debt and hybrid

funds Equity Funds primarily invest in

stock or equities of companies they

offer the potential for higher returns

but comes with higher level of risk due

to Market fluctuations debt funds invest

in fixed maturity Securities like

government and corporate bonds These

funds aim to provide regular income and

they are generally lower in Risk

compared to Equity Funds hybrid funds

are also known as balance funds hybrid

schemes invest in mix of equities and

debt securities

the goal is to balance potential return

and risk by diversifying across

different asset classes so Equity got

more risk and it got less risk but

return through Equity are more data are

less so if you make a balance of equity

and debt you can manage you can get

better return with minimizing the risk

foreign

mutual fund dominate the landscape of

mutual fund investments in India

constituting the largest portion of

total investment

Equity Funds are then further

categorized into distinct time such as

catering to different investment

strategies and risk profiles

the categories of Equity Funds include

large cap funds prominently invest in

established and well-established

companies with large market

capitalization like the mutual fund

scheme that invest into large cap stocks

like ITC Hindustan liver TCS Infosys

Reliance SBI These funds are known as

large cap funds

they aim for stability and growth often

offering more conservative returns

because these are already grown

organizations so the potential growth

for them is at very lower rate but they

offer stability so you cannot imagine

that

SBI or following of SBI or bankruptcy of

reliance

with cap funds invest in companies with

medium-sized Market capitalizations

These funds offer balance between growth

potential and risk

catering to investors seeking a moderate

level of risk so if you want to take

some risk you can go for Mid cap funds

small cap funds Target investment in

companies with smaller Market

capitalizations they offer higher growth

potential but come with higher

volatility and risk levels

the next category is multi-cap funds

These funds have flexibility to invest

across companies of all sizes including

a large mid and small caps this diverse

approach allows fund managers to adapt

to changing market conditions so if

large cap or not doing well mid cap and

small cap we do well if mid cap are not

doing well small cap will do well and

you can increase value of your

investment

sectoral funds focus on specific terms

or

research as a technology

banking

targeted exposure to a particular sector

performance each category within Equity

Fund serves different investor

preference and risk appetites

the key is to align your investment

goals and the risk tolerance with

appropriate category to achieve the

desired Financial outcome

this slide compares the large cap mid

cap and small cap and based on their

potential returns and risk level

liquidity also considered large cap

funds offer moderate returns with lower

risk and higher liquidity mid cap funds

offer better results uh

large cap funds but comes with higher

risk small cap funds can provide the

highest returns but also carry the

highest risk holding small cap

investment for longer term can

potentially mitigate some risk and yield

better return so if you want to buy

small cap one you have to hold it for at

least for 7 to 10 years then you can get

better returns with minimum risk

the next two slides shows the examples

of how much money you could make from

different type of funds in India

these include large cap mid cap and

small cap funds even though how well

these funds did in the past doesn't

always predict how they will do in

future

of course people still like to compare

based on what happened before so past

performance is mentioned

in one of these slides they are showing

how these funds did over the past five

years

the ones we are talking about are the

best ones and the average of all funds

in the category will likely to bid a

lower around five percent less

so we are talking about the best if you

take average category you can assume it

is for for its performances is five

percent less than the top performing

funds

for example large cap funds have given

20 returns consistently over last five

years while mid cap funds did around 30

percent

now let's talk about small cap funds and

Central funds

small cap funds have done really well

with almost 40 percent returns per year

over last five years

this means that

your money could have

been doubled in less than two years they

also talk about

another fund that invest mainly in

pharmaceutical companies this fund has

given a

written around 22 percent

this kind of funds can be a good choice

when the government rules our country's

financial situation help a specific

industry to grow so if government

is giving tax relaxation to the tech

companies then tech companies will do

well

so this is about Equity Funds the next

category is debt fund

so debt fund is the type of mutual fund

that puts money into fixed income

instrument like corporate and government

wants corporate debt Securities and

money market instruments

this instruments aim to provide capital

appreciation over time

debt funds are also known as income on

bond funds

debt funds are preferred by the investor

who want low risk options

or those who invest in traditional

assets like fixed deposits and bonds

people looking for short-term places to

park their funds or the senior citizens

seeking

payout at regular intervals the debt

points are prepared by this kind of

investors

so the different kind of debt funds are

liquid funds

liquid funds invest in very short term

period they have a maturity up to 91

days they are highly liquid and suitable

for parking Surplus fund with a short

term period while generating modest

returns so if you have money that you

don't want to use for next let's say

four one five ones so you can invest it

into liquid fund liquid fund will give

you the returns around

like nine percent ten percent not even

ten percent eight percent to nine

percent

so you can get uh the return better than

the bank FD so

liquid funds primarily invest in the

market Securities which has maturity of

around 91 days

the next is ultra short-term fund this

fund invest in debt Securities with

slightly longer maturities typically

between three to six months

fixed maturity plan funds have fixed

maturity date and invest in debt

instruments that match uh that timeline

providing investor with predetermined

investment Horizon

the next is Guild fund Guild fund

primarily invest in government

securities these bonds are considered

relatively safe but might have a lower

returns compared to other debt funds

the next is dynamic bond fund Dynamic

bond fund adjusts their portfolio

maturity and allocation based on

changing interest rate scenarios to

maximize returns

so next is short-term funds investing in

debt instruments with maturity is around

one to three years this fund aimed to

provide better returns than liquid or

Ultra short Temperance with slightly

more risk

so for a novice investor like you I

would recommend

to invest in Equity Fund primarily and

you can 10 to 15 percent of your

investment you can put into debt funds

like Dynamic bond fund or Guild funds

exposure to that fund should increase

with increasing age

the next category

is called as hybrid funds

these are very popular among investor

hybrid funds are also known as balance

fund

the invest this investment scheme is the

blend of both equity and debt

instruments

within a single portfolio so hybrid

funds hybrid the word itself suggest you

the hybrid funds invest in debt and

Equity this combination allows investor

to potentially benefit from the growth

potential of stocks while also enjoying

the stability of bonds so Bond as better

stability than stock

bonds prices doesn't fluctuate like

stock prices each hybrid fund is

designed with a specific mix of equity

and debt catering to different kinds of

investors and their risk appetites the

allocation of equity and debt can vary

widely based on funds objectives and

prevailing Market condition so the

market is is growing well

the allocation will be 50 50 percent or

maybe 70 30 percent 70 percent equity 30

percent if the market is not doing well

then this allocation might change like

uh seventy percent at 30 percent equity

so hybrid fund has got that flexibility

so hybrid funds returns are more stable

than the Equity Funds

now advantages of investing in Balance

funds are diversification by investing

in Balance fund you are buying a mix

asset classes hybrid funds offer

diversification which can help to

mitigate the impact of poor performing

segment on

the overall portfolio

the next is low risk

the presence of depth instrument in the

portfolio provides cushion against the

volatility that is the inherent quality

of stock market

which makes hybrid fund generally less

risky as compared to Pure Equity Funds

the hybrid funds can be categorized as

a balance fund Equity oriented and debt

oriented so in the next slide we will

see the details

Equity oriented hybrid funds these funds

have higher allocation to equities

typically around 65 to 80 percent

with the reminder with the remaining

investor investment in the debt

instrument

they are suitable for investors seeking

higher growth potential with some level

loss risk okay

now the next is

debt oriented this funds a larger

portion of these funds often 72 way to

80 percent is invested in debt

instruments

while a smaller part go in goes into

equities they are favored by

conservative investors looking for

stable returns with limited exposure to

equity Market fluctuations so when you

are 70 to 80 age and you want your

investment to be safe

and you want some kind of appreciation

then date oriented hybrid schemes are

preferred the next is balance funds

they are also known as aggressive hybrid

funds they maintain a balanced

allocation between equity and debt

typically around 60 to 65 equity and 40

to 45 percent in debt they aim to offer

a middle ground between growth and

stability so depending upon your age

risk appetite you can either choose

Equity oriented debt fund debt oriented

hybrid fund and

balance fund

now next we will consider the cost of

investment in mutual fund as

you are

giving your money to someone for

investing some professional

for investing in the stock market he

will charge fees every fund Levy's fees

from investor for managing their assets

which is essentially the cost for

investing this fee is known as Express

expense ratio so let's discuss the same

the expense ratio is a crucial metric

that investor in mutual fund should

consider while buying a typical a

particular mutual fund scheme it

represents the total annual cost

associated with managing and operating a

mutual fund as a percentage of funds

average

nav that is net asset value

in other words it indicates the

proportion of funds asset that are used

to cover various expenses related to its

Administration and management fund has

to do the payouts for

the towards the managing the funds means

salary to the employees marketing cost

administ Administration costs so this

cost is taken from

the investment your investment so and

that is called as expense ratio

the expense ratio is calculated annually

and expressed as a percentage of funds

average net asset value over a specific

period

the nav is the value of funds asset

minus its liabilities divided by the

number of outstanding units that we have

seen

now how the expense ratio is calculated

let's see expense ratio is equal to

Total fund expenses upon

average net asset value into 100

so let's understand what is the impact

of investor returns a higher expense

ratio means larger portion of investor

returns is being used to cover the cost

of running the mutual fund as a result

higher expense ratio can eat into

overall returns generated by the mutual

funds

therefore investors generally prefer

funds with lower expense ratio

When comparing different type of mutual

fund it is important to consider expense

ratio alongside other factors such as

historical performance investment

strategy and risk profile while low

expense ratio is generally preferred

investor should also evaluate whether

funds

management and strategies justify that

cost

so in summary

the expense ratio provides investor with

a clear understanding of cost associated

with investing in a mutual fund

so it's a crucial factor to consider

When selecting a fund it is directly

impacts investors potential returns so

you should always go for the fund with

lower expense ratio but again that fund

has to perform well

so you need not go into the calculation

details etcetera etcetera

so just just remember you don't have to

calculate that one takes care of it so

you just remember while investing that

you should if you are buying if you have

two options buy a fund with lower

expense ratio because that will give you

the better return because expense ratio

is the money that is taken by mutual

fund house from the investment made by

the investors

so this slide shows the example of

expense ratio is used to calculate nav

so next is entry load

and exit load

the entry load is a fee or charge

imposed by an investor when they are

invest in mutual fund scheme it is

deducted from the amount the investor

initially puts into the mutual fund

nowadays most mutual fund do not charge

any entry load

an exit load is a fee that an investor

has to pay when they decide to redeem or

sell their units in a mutual fund scheme

this fee is deducted from the Redemption

proceeds before the investor receives

their money so if exit load is one

percent

so so whatever you are getting after

your Redemption

one percent is deducted from that and

the remaining 99 percent is given to you

the purpose of an exit load is to

discourage investor from withdrawing

their investment too soon after entering

the scheme

now exit load amounts and their duration

often depends on the factor like type of

mutual fund scheme and the length of

time and investor holds their investment

for example Equity Funds might have

shorter exit load periods compared to

debt funds

exit loads might be higher for

short-term investment

with the intention of encouraging

investment investors to stay invested

for the longer time

the exit load gradually decreases or

becomes zero for instance exit load

might be applicable investor exits

within the period of six months but if

they hold their investment for more than

a year there might not be no exit load

exit load for dead scheme is generally

zero for Equity schemes

charge exit load if you redeem your

investment within a year from the date

of investment so if you redeem your

investment after one year there won't be

any exit load so this exit load are so

small that you can ignore them

Now options

in mutual fund

when you are thinking about investing in

mutual fund there are two main choices

that you will come across

option one is called as growth option

that means that any profits or gains

made by the mutual fund are reinvested

back into the fund itself so over time

the value of your investment can

potentially grow

the second option is bit different this

is called as idcw this stands for income

distribution come Capital withdrawal you

might have heard it referred as a

dividend option in the past

with this option income generated by the

mutual fund is distributed to the

investor at regular interval

it's like getting a little piece of the

earning from fund periodically

so for example let's see

HDFC top 100 fund uh offers two choices

one is growth option another is idcw

now here is something interesting if you

compare the net asset value of growth

option and idcw option you will often

notice that nav of growth option is

higher

because

in the idcw option some of the earnings

are given out to the investor regularly

so as some of the earnings are given to

the investor regularly the value of

total investment Falls so NAB Falls

because nav is the value upon total

number of units so total number of units

remain the same number of investors

remains same but the value decreases

because the sum of

the portion of the investment

is given to the given back to the

investor periodically

so let's compare these two options

idcw stands for income distribution com

Capital withdrawal it's a specific

option that investor can choose when

investing in mutual fund this option

allows a portion of investors Capital to

be paid out as dividends

with idcw a part of earning generated by

mutual fund is distributed as dividends

to the investors

this means that you receive share of

profits made by the fund

the net asset value of mutual fund is

affected by the dividends when Dividends

are paid out nav decreases in the

proportion to the amount distributed

growth option in mutual fund is a choice

where investors don't receive any

regular payouts or dividends instead

the money

you invest in growth option remains

within the fund and continues to grow

over time

the magic of growth option lies in

compounding the earning generated by

mutual funds are reinvested back into

the fund itself this means that your

initial investment not only earns return

but also earn Returns on those returns

means whatever returns are again

reinvested in the fund so you are

earning return on your principal and

earning return on the

interest means the return that you have

achieved from the mutual fund

so over time this compounding effect can

grow significantly increase the value of

your

investment

so the difference between idcw and

growth options is given on the slide

now what to choose

choosing between growth and igd IED CW

plans the decision between these two

options depends on individual's investor

financial goals risk tolerance and

investment Horizon so these three

factors are considered or should be

considered while choosing the

between growth and idcw for you I would

suggest to go for growth plan don't even

consider idcw plans because you don't

need

the regular payouts from your investment

till age of 60.

so investor who prioritize long-term

wealth accumulation without requiring

regular income find the growth option

more suitable

due to the compounding effect

for example goals like building

retirement funds bind how buying house

or child education growth option is very

suitable

investor who need steady in income

living expenses or other financial

obligations

might prefer idcw plan for its regular

payouts

this type of plans are suitable for

senior citizens or investor who

6. or who want regular payout

or who prioritize regular payout than

wealth building so this option can be

also considered for goals like going

vacation every year so in you invest

some amount you opt for idcw so every

year you will get some portion from your

investment and you can enjoy your

short-term goals like going on vacation

through this investment