NAV Adjusted Returns

Investments

NAV adjusted returns account for dividends reinvested in the fund (in growth option) versus paid out (in IDCW option). For comparing mutual fund performance, always use the Growth NAV not the IDCW (formerly dividend) NAV -- Growth NAV compounds all returns.

In detail

Growth plan vs IDCW plan:nGrowth plan: dividends not paid out. Reinvested in fund. NAV grows continuously. LTCG only when you redeem.nIDCW (Income Distribution cum Capital Withdrawal): dividends declared periodically. NAV falls by dividend amount on ex-date. Dividend taxed at slab rate.nnFor long-term wealth creation: always choose Growth plan.nFor regular income (retirement): IDCW may be useful but SWP from Growth plan is more tax-efficient.nnHistorical IDCW trap: many investors thought dividend NAV was "cheaper" and preferred it -- not understanding that dividends are just returning your own money.

Real-life example

🇮🇳 India example

Fund A Growth NAV: Rs 100 in 2010 grew to Rs 450 in 2024. IDCW plan of same fund: NAV only Rs 180 in 2024 but paid out Rs 270 in dividends over 14 years. IDCW investor paid tax on every dividend at slab rate. Growth investor pays 12.5% LTCG only at redemption. Growth plan investor keeps significantly more wealth after tax.

Frequently asked questions

Should senior citizens choose IDCW for regular income? ▼

Better alternative: invest in Growth plan, then set up SWP (Systematic Withdrawal Plan) for monthly income. IDCW payout is irregular and unpredictable. SWP gives predictable monthly income and is more tax-efficient -- only the gains portion of each SWP redemption is taxable, not the full amount.