Please check and tell me is this correct?
In this option ,the step is as follows
– Re-adjust the NAV assuming that dividend is paid.
– after that buy more units of same MF with that dividend money and allot it. So ultimately the number of units increases and the NAV goes down. In this case dividend money is not given to the investor but re-invested in the same scheme.
Example : let assume you have Rs 1 lac of units in a mutual fund with NAV of Rs 100 , you will have 1000 units .dividend declared : Rs 20 per unit
How it works : Your dividend will be Rs 20,000 , and NAV will come down to Rs 80 like it happened above. Now this 20,000 will be re-invested in same mutual fund and you will get extra 250 units (20000/80).
Your Total units = 1250
NAV = Rs 80
Worth = 1250 * 80 = 1,00,000
Whether the return of both growth and dividend plans are same? Which is tax efficient??