Most Mutual Fund schemes have a Growth Option as well as a Dividend Option. The scheme invests in the same set of stocks or bonds but the nature of distribution of profit differs. The behavior, objective, fund manager, performance are all the same but the way your returns are delivered is different.
Growth Option: If you choose the growth option, profits made by the scheme will be invested back into it. So, when the scheme gains, the Net Asset Value (NAV) rises and in case of a loss, it goes down. The only option to get profit in the growth option is to sell or redeem your investments.
Dividend Option: If you choose the dividend option, your profits will not be re-invested into the scheme. Instead, profits or dividends are distributed to the investor time to time (quarterly, half-yearly or yearly). There is no guarantee on the amount and frequency of dividends. Dividends are declared only when the scheme makes a profit, at the discretion of the fund manager. When a fund house declares the dividend, this dividend gets deducted from the NAV (net asset value) of your Mutual fund dividend scheme.
