Reliance Growth – Growth, Dividend & Bonus

What is the difference between Reliance Growth – Growth, Dividend & Bonus Option?

Hi,

What exactly is the difference b/w reliance growth fund -bonus option and rgf- growth option. There is one more reliance growth fund-dividend option. bonus option and dividend option mean the same??
And why is there so much of a difference in their nav's. Which one is better to buy?
Reader

Reliance Growth fund is my one of the most favourite mutual fund. Reliance Growth fund offers basically 3 types of schemes.

01) Reliance Growth – Growth Option

02) Reliance Growth – Bonus Option

03) Reliance Growth – Dividend Plan (D)

Well, Honestly speaking, People use the term “Bonus” option for Dividend Funds only. In fact, the other name for Dividend Plans is Bonus Plans only.

But, well Reliance Growth fund is exception. Because for this fund, Bonus, Growth & Dividend options are different.

See the NAV of all the 3 funds on 29th Sep. 2009.

- Growth Option – Rs. 388.44

- Bonus Option – Rs. 64.43

- Dividend Option – Rs. 55.12

Now, Growth Option means, the fund will re-invest all of its profit again in the same portfolio. This is to achieve maximized long term capital gains. Dividend Options are of 2 types. Dividend payouts and dividend re-investment. The reason why the NAV of Dividend option is lower than that of growth option is because every time when the fund pays dividend, the NAV falls.

Now, Bonus option is much same like Dividend option. But the only difference is that, unlike dividend option, bonus options are not forced to pay out dividend on regular basis. Dividend option has to pay out dividends on the regular basis (It’s not mandatory) to compete with peers. But Bonus option does not need to pay out bonus/dividends on the regular basis and that’s why the NAV of Bonus option is slightly more.

Which is Better to Buy? -

Well, The Best option to buy is – Reliance Growth – Growth Option or Dividend Re-investment option. Because both are the same.

The logic behind going for Growth option is very simple. Because if you want excellent profit in the long run, you must keep re-investing the profits again and again over the time. If you take out your profit in the form of dividends, bonus or redemptions than you won’t build sufficient wealth.

So always go for Growth Option when it comes to investing in equity mutual funds.