Can you answer my questions regarding mutual fund investments

Thanks for the kind words. Here are your answers -

A. The portfolio value that you see are post dividends received by you. However, if you do not need the dividends you can switch to growth option and book profit in future. In growth option the fund does not pay you anything in between and keep deploying the profits in the portfolio. The growth in the fund NAV is reflection of that. However, in case of dividends declared, the fund pays you part of the profit based on the discretion of the fund manager/ profit made by the fund. Investors should choose scheme options - growth or dividend - depending upon their investment needs.

With regards to your query, can you reinvest the dividends received from HDFC Prudence fund in the fund again? Yes, you can do that. In fact, you can add any amount anytime you wish. However, growth option is better in this case as taking the dividend from the fund and then investing it in the fund again is a cumbersome and unnecessary process.

HDFC Prudence fund is a top performing balanced fund and has a history of long term wealth creation. HDFC mutual fund is a reputed fund house and the fund manager managing this fund is one of the best minds in this business. Therefore, you can expect a good future for this fund. It is not very risky but carries moderately high risk. The fund invests only 65% in equities and rest in debt therefore less risky than equity funds.

If you are trying to make a living from mutual fund dividend income, then you should remain invested in this fund. Why you are thinking of redeeming the profits and invest in some other fund? Though you can do that but remember the dividend amount will come down as the number of units in the fund will reduce post redemption.

Hope you got your answers right! Thanks for writing to Advisorkhoj!