I want to know if Coin allows us to reinvest the dividend we get from Direct Plan Dividend type Mutual fund ?
If yes, then do I need to do some settings for it? But where?
If no then the dividend is just visible in my equity balance, right?
We used to offer the dividend reinvestment option on mf.zerodha.com (the platform where we were selling only regular plans before COIN). Whenever the AMC credits the dividend reinvested units into your demat account, the same does not reflect in your portfolio window. This is because there is an issue with the transaction feed file which we receive from the AMC as a result of which the dividend reinvestment units are not getting updated automatically in your portfolio window. We have to manaully update the units in the portfolio as per the particular day’s NAV.
For this reason, we are not providing the option of dividend reinvest to avoid this inconvenience. But, there is a dividend payout option for all the schemes.
Ok. So on Coin, dividend goes to my bank account or available in Equity balance? (would be great if i get to decide this so I can save small charges to bring fund from bank account to zerodha again)
If its a dividend payout option, then the dividend amount will get credited to your bank account.
Ok. So I assume there is one more option like dividend credit which if selected allows the money to be in my equity balance, right?
(I have not yet enrolled for Dividend MF so getting some info how this works.)
The dividend amount will not be credited to your trading account. It will be credited to your bank account which you would have linked to your Zerodha Trading account.
Thank you. This solves my concern. Coin looks great. Started using it.
Please give user to choose this option. I am only refraining to buy from zerodha because I think Dividend reinvestment is a good choice over the long term.
You are paying a DDT of 28% on the dividends and you are reinvesting it. Why wouldn’t you instead just purchase the growth plan?
Yes, there is no doubt that dividend reinvestment is the best choice over the long term, as it gives you the benefit of eighth wonder of the world, i.e., compounding. But there is actually no need to first get the dividend and then reinvest it. Instead just invest in a growth fund, in which the fund doesn’t pay any dividend to you, but instead automatically reinvest all the profits made.
Manually investing the dividend, either by you, or by coin, would only increase your costs and these costs compounded over time would take out a big chunk of what you would have made, had you invested in the growth fund. The same principle of compounding which you are looking to take advantage of, would work against you. As Einstein rightly said about compounding, “those who understand it, earns it, those who don’t understand it, pays it”.
Hi Harsh, thanks for the info. Would you also know how to check what’s the reinvestment cycle for growth mutual funds ? So as to know whether they add profits to principal amount monthly, quarterly, half yearly or yearly?