If someone asked you which car should I buy, an SUV or a premium hatchback, what would your advice be? You probably would ask, what is your main reason for buying this car? Do you need it for a long haul along with family or you need something convenient for yourself to suit the city roads for regular driving? Just how, the choice of a car depends on your needs, the choice to opt for a growth or dividend option in case of of mutual fund investments depends on why you are investing in the first place.
If you are a long-term investor, you need a SUV for the long haul. Invest in the growth option of the fund of your choice. The earnings by the fund accumulate and compound over time leading to a higher NAV that’ll give you a higher return when you sell. But if you are looking to supplement your regular income from other sources with some return from your Mutual Funds, opt for dividend payout. Dividends are tax-free in the hands of investors. Look at the tax implications while making a choice between the two options and let your financial requirement decide which option works for you.