I have noticed several schemes have come up with Monthly Dividend (MD) plans in the past few years. So my question is, for a person whose primary goal is a monthly cash flow, can afford very nominal risk in capital and invests lump sum in Equity-oriented Balanced Funds, which option is better?:
1. Monthly Dividend Plans
2. Monthly SWP @ 8% p.a (Growth Option)
Investment Tenure: Minimum 5 years. (Note: I am aware that SWP in the first year will attract taxes, that is a non-issue for me)
1 Answers
Hi,
If one can afford to take low risk, may be investing in Equity oriented balanced funds is not a right choice!
If one is looking for fixed and regular withdrawal, SWP can be a better choice, as in MD option the rate of withdrawal can vary..
For example, you can check out the dividend payment history details of TATA balanced fund - MD plan..visit this link..
Also,
- Though the Dividend income received by you is tax-free, the fund house deducts DDT (Dividend Distribution Tax) of around 28% and then pays you the dividend. So, if you are in 10% or 20% tax bracket, opting for a MIP-Dividend payout plan is not a tax-efficient choice.
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