Monthly dividend paying mutual funds

If you invest in mutual funds, then you can get much better return or dividends over bank fixed deposit interest. However, investing in mutual funds has some risk and I am sure as an ex-banker you are aware of it.

Having said the above, if you invest in right funds matching your risk profile and remain invested for the long run then the risk minimizes over a period of time.

As you are looking for monthly dividends, balanced funds could be a good option. Please check this link and see the schemes which has monthly dividend payout option and has a consistent track record https://www.advisorkhoj.com/mutual-funds...

With regards to investing in HDFC Prudence Fund, yes you can invest in this fund if getting monthly dividend is the main criteria. This fund has a consistent monthly dividend payment track record and may suit your investment needs. Check the dividend payout track record of this fund here - https://www.advisorkhoj.com/mutual-funds...

However, while investing in mutual funds in order to get monthly dividends, kindly note that dividends are not assured, neither the quantum or the frequency/ date. Dividends are paid from reserves that the fund already has or if the fund is generating extra surplus to supplement the future dividends. Please also note that NAV gets adjusted to the extent of dividend paid on the date of dividend declaration. For example - if the scheme NAV is Rs 40 and the fund declares Re 1 per unit dividend, the NAV will become Rs 39 post adjustment of the dividend.

You have written about safety of principal amount. As we have mentioned earlier investing in mutual funds has some risk. If the markets are volatile and the fund is paying dividends too there will be periods when the total value of your investments may go down from the amount that you invested initially. However, if you stay the course, we have found that it makes up and gives capital appreciation over and above the dividend payments. the main 'mantra' is to remain invested for the long term in order to enjoy the fruits from your investments.

Hope you find that above suggestions useful and may now take a decision whether to invest in mutual funds or not.

Thanks for writing to Advisorkhoj.