Many investors are not aware of the different types of investment products available in the market. Apart from the basic mutual funds, investors do not have the knowledge of different funds that are ideal for generating a stable income. One such fund is a dividend yield fund.
A dividend yield fund is a fund that invests the majority of the amount into high dividend yield stocks. As the name suggests, the fund generates higher returns in the form of dividends that are paid by the company.
However, it is important to keep in mind that the entire amount is not invested in dividend-paying stocks; it is also invested in stocks that show the potential to grow.
Investors should invest in dividend yield funds because they help generate regular income from the investment. They are less risky as compared to other growth-oriented funds and generate a steady income, which can be used to purchase additional shares of the same mutual funds.
Dividend yield funds are ideal for retired investors or for investors who are looking to generate an alternative source of income. If you have the funds but are not willing to take on many risks, you can invest in this fund.
The fund invests into equity stocks of companies, which means the capital gain will be taxable. There will be a 15% tax on the short-term capital gain and 10% on the long-term capital gain on an amount exceeding INR 1 lakh in a financial year.
Secondly, there will be a 10% dividend distribution tax charged on the dividend distributed by the mutual fund. The tax will be deducted before it is credited to your account in the form of dividend and is paid by the mutual fund company.
There are various things you need to consider while investing in the fund. Your risk appetite and investment horizon are the two main factors.
If you have a low-risk appetite and are only looking to generate additional income through the investment, this is the best choice. However, you also need to keep in mind that you will not be able to enjoy the appreciation of the fund with regard to value since the fund will only invest into stocks that are high in terms of dividend payouts.
If you remain invested for a long period, you will be able to enjoy a higher income in the form of regular dividends.
You need to be very careful when selecting a dividend yield fund. Consider the performance of the fund over the past five to ten years and compare the returns generated by the same.
Make a comparison of the dividends paid over the years and then choose the fund. Make the right choice by conducting a thorough market research and analysis of the available funds.
We have listed down few of the best dividend yield funds that you can think about investing. For more details, set-up your account and talk to our financial advisor today:
To ensure the investments you make help you toward a financially secure future, you must avoid certain investment mistakes that a lot of newcomers end up making. Mistakes such as:
Best way first-time investors start their investment planning is by sorting the top mutual fund schemes in the order of higher returns. You have to do your research to understand how different mutual funds schemes work and not just select a scheme based on their past performance.
Never invest in schemes on a notion of “others are investing” or just because “market is Up”. Before taking any decision you have to do research, lay down your investment plan and understand the best possible schemes that will help you achieve your goals and help you grow your investments.
To read the entire list of common mistakes that you should avoid, check out 10 mistakes to avoid while investing in mutual funds.
FundsInn is an online investment platform. Individuals can manage and make investments in Mutual Funds, Corporate Fixed Deposits, Bonds through our platform at Zero processing fee.
FundsInn is AMFI certified company that offers various services including Financial planning and Assets management. We recommend a personalised investment portfolio keeping your financial goals and investments in mind.
Our financial advisors understand your current financial status and suggest a financial plan that suits your needs. You can initiate different types of transactions including Lump sum investment, SIPs (Systematic Investment Plans), in various schemes available on our portal.
If you are looking for guidance then get in touch with our financial advisor and get started today.
Understanding Short Duration Funds Every investor strives to maximize their investments by making the right decisions. The tenure or period of investment plays a crucial role in the same. Investment decisions should always be made keeping the period of investment horizon in mind to ensure high returns over the investment period. If you are planning to invest for a short-term…Read More
Understanding Money Market Funds Understanding different types of mutual funds will not only help you make a wise decision but will also help you diversify your investment portfolio. One such type of mutual fund, which offers security to your investment, is a money market fund. What is a money market fund? A money market fund is a mutual fund where the…Read More
Choose the Best Low Duration Fund Investors who are keen on investing in short-term funds have a number of options to choose from. Every fund has a unique time horizon and features that set it apart from other funds. One such fund, which you should be well versed with, is a low duration fund. What is a low duration fund?…Read More