Mutual Fund: What is Dividend Transfer Plan means ?

Investing in mutual funds is not rocket science. But, there are more options that the popular lump sum investment route & systematic investment plan (SIP).

1. Dividend transfer plan..!

As the name suggests, here the dividend you earn on a scheme can be transferred to purchase units of another scheme. Not all schemes allow this option.

2. How it works..!

 Fund houses set a minimum dividend amount that can be transferred, if the dividend that your scheme earns is less than that minimum amount, the dividend is reinvested into the scheme itself.

Unlike a typical systematic transfer plan (STP), where you decide the amount, here you do not know the amount of dividend your fund will declare. It could be even be only 1 to 3 times a year.

3. Why dividend transfer plan..!

 This option works for those who want to be safe with their investments, for low-risk investors. They can invest in a debt fund, and have the dividends transferred into an equity fund.

This strategy gives equity exposure to your money, even as you maintain the safety of your capital amount. 

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