The Sundaram Mutual ad is giving reasons – ‘Why investors love our dividend policy’….3.
They say to pay dividends, funds must BOOK profits. This is true, but how does the fund house know whether I need the cash today or after 5 months?
Do they know that I am a 23 year old hoping to accumulate money for buying a house when I am 33?
Or do they think I am a 84 year old who needs the dividend so that I can pay the grocer’s bill?
Well they just know that I have opted for the dividend pay out mode. Nothing else matters. Why declare a dividend when the dividend amount is so small? What if I have 300 units? I will get Rs. 1800.
Does this Rs. 1800 offer me anything at all? Very likely that this amount of money will lie idle in my savings account earning a paltry 3% p.a.!
Dividend declaration is a policy decision – and some managers claim it is because they know to time the market. If they really knew how to time the market, and they feel it is currently high (obviously that is why they are declaring the dividend) should they not redeem all the money and wait for the market to come down?
The asset management compensation structure will not allow them to do that, right?
Also unlike a company dividend, this is just my money being distributed to me – so is the amc doing me a favor? no. Not at all.
Just that it makes a lot of sense to keep money in GROWTH OPTION ONLY. Withdraw money as and when you need…NOT WHEN THE FUND MANAGER DECIDES to distribute it.
Withdraw as much as you need, not accept what the manager gives.
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