Investing in mutual fund is one of the most popular ways to grow wealth. But when you buy buy mutual fund you are often faced with a choice Growth or IDCW. Many investors get confused about which option to choose🤔
Let’s discuss about the most popular categories of mutual funds:-
💡Understanding about Growth Mutual Fund– Invest in the companies who have strong potential to grow and generate high returns but investing in this fund is risky as these companies are highly exposed to market ups or downs.
💡Growth is a type of investment option in mutual funds where all the profits or dividends are reinvested back to the funds and investors do not receive a regular payout or dividends which result in compounding over time.
👉Taxation: You pay capital gains tax only when you redeem your units.
👉Best suited for long term investors who believes in wealth creation rather than regular income.
💡Understanding about IDCW– (Income Distribution cum Capital Withdrawal Option)
IDCW also known as dividend plan invest in the companies which are mostly large cap and well established in the markets.
👉The key feature of this option is that the investors receives regular payouts or dividends (profits).
👉Best suited for investors who want regular cash flow.
| Feature | Growth Option | IDCW Option |
|---|---|---|
| Objective | Capital appreciation | Regular income |
| Returns Handling | Reinvested (compounding) | Distributed as payouts |
| NAV Trend | Increases over time | Falls after payouts |
| Taxation | Capital gains tax on redemption | Taxed as income |
| Suitability | Long-term wealth creation | Short-term cash needs |
💡Which one to choose~
Growth~
- If your goal is wealth creation ( long-term goals).
- More tax-efficient.
- Investors get benefits from compounding.
IDCW~
- Best suited for the investors who want passive income (retirees).
- More cash flow tool than creating wealth for future.
📌 Final Thoughts
The choice between Growth and IDCW depends on your financial goals. If you’re building wealth for the future Growth is the clear winner. If you need regular payouts, IDCW can serve that purpose.