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How dividends paid reduce your net asset value

When a mutual fund distributes dividends, it pays out a portion of its earnings to its investors and reduces the NAV of the fund.

NAV is calculated by taking the total value of all the fund's assets minus its liabilities, divided by the number of outstanding shares.

A dividend distribution reduces the NAV of a mutual fund, but does not necessarily affect the overall value of the investment.

Low NAV does not always indicate poor performance as it can fluctuate due to various factors such as market conditions, changes in the fund's portfolio etc.

Investors have two options when it comes to dividends distributed by mutual funds: withdraw the money or reinvest in the same scheme.

Reinvesting the dividend money reduces the NAV of mutual fund units, but it does not necessarily mean losing money.

When evaluating a mutual fund's performance, investors should consider various factors such as its historical returns, expense ratios, etc.

Investors should understand their risk appetite and investment objective to make an informed decision and choose the more suitable mutual fund scheme.

Dividend distribution does not necessarily indicate poor performance or reduce the value of your investment.

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Mutual Funds: How dividends paid reduce your net asset value

Dividends always excite us, but are they really worth it when it comes to mutual funds?

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