INSUBCONTINENT EXCLUSIVE:
Affluent investors usually prefer putting money in stocks directly rather than investing in mass products like mutual funds
But, after the proposal in the recent Budget to tax dividends at the hands of investors, they may have a reason to consider mutual funds
especially dividend-yield schemes
This is because dividends that share portfolios of mutual fund schemes receive from companies are not taxed.
For High net worth investors
The dividends that mutual funds receive in their portfolios is different from the ones they give their unitholders
Mutual funds invest in shares of companies on behalf of the investor, who gets units representing the share portfolio
Dividends given by companies gets added as units for holders.
Analysts believe the quantum of gains could be higher in dividend yield funds,
which primarily invest in a portfolio of companies that pay a high dividend
Certain PSU funds where the dividend payout is large could also see interest from affluent investors
A dividend yield fund typically builds a portfolio of high dividend paying companies
Typically, during a downturn, dividend yield fund returns tend to fall less than those of growth-oriented funds
The high dividend yield acts as a barrier and in tough times, prevents these funds from falling beyond a point
He recommends Aditya Birla SL Dividend Yield Fund and UTI Dividend Yield Fund.
Bhansali said that an investor can buy the growth option of
an equity mutual fund scheme
The dividend paid by companies in the portfolio will be added to the net asset value (NAV) of the scheme which will go up subsequently.