Best Dividend Yield Mutual Funds to invest in India 2024 (2024)

The investors who can profit the most from investments in the best dividend-yield mutual funds are as follows:

1. Investors Looking for a Passive Income Source

This form of the fund is most suitable for investors who are looking for a passive income, given that dividend yield funds offer regular dividend payouts to their investors.

2. Investors with Low-Risk Appetite

The risks of dividend yield funds are much less than other forms of equity mutual funds, which makes them low-risk funds and most suitable for investors who have a low-risk appetite.

Estimate your returns on mutual funds investment withSIP calculator. It is an easy-to-use tool that allows investors to assess probable returns on SIP.

The major factors to be considered while finding the top dividend yield mutual funds and investing in them are-

1. Risk Tolerance

If you are a traditional investor who prioritises portfolio stability, you should search for funds that have a higher allocation to large-cap equities. This is because your primary goal is to reduce risk by investing in a program with low hazards.

2. Investment Tenures

Like with other mutual funds, it is critical to look into the duration of the fund's investment tenure. A dividend yield fund that has seen the stock market's bull and bear phases will provide a higher return than newer companies.

Furthermore, newly launched companies advertising funds may perform well while markets are high, but to secure long-term benefits, investors should review the fund's tenure and performance across market cycles.

Investors can reap these benefits by investing in the best dividend yield mutual funds:

• Equity exposure with lower risk: Dividend yield mutual funds are relatively less impacted by market volatility than other equity-oriented MF schemes. Hence, investors who are seeking equity exposure and higher returns than fixed-income instruments, such as bank fixed deposits, can benefit from schemes of this sort.
• High returns over a long term: Since dividend yield funds invest in shares of companies that have strong financials and a proven track record, they have the potential to generate high returns in future.

• Regular income: Since underlying companies in these schemes declare regular dividends, MFs can be an appropriate option for investors seeking regular income and stability.

Investment routes: Investors can allocate their funds to these schemes via two routes – lump-sum and a Systematic Investment Plan (SIP). The first option allows an individual to invest the entire amount at once. By taking the SIP route, investors can allocate their savings to the best dividend yield mutual funds at fixed intervals, such as monthly, quarterly, or yearly.

While finding the best dividend yield mutual funds, ensure to go through the below-mentioned risks-

1. Inherent Risks of Mutual Funds

The inherent risks of mutual funds include liquidity risk, credit risk, market risk, concentration risk, and more. These risks are present in the case of dividend yield funds, too.

2. Greater Taxes

The government has shifted the tax incidence of dividend income; therefore, this factor increases the taxes associated with dividend yields.

3. Returns Vary Based on Performance

These funds are less volatile since the fund's underlying investments are affected by market swings less. There is no denying, however, that the returns are subject to market risk and cannot be guaranteed.

FAQs

Q1. How does a dividend yield fund work?

The dividend yield funds' primary goal is to pay out monthly dividends to investors. The fund manager does this by investing mostly in securities of companies with the potential to provide regular payouts.

Q2. Are dividend yield funds a good investment?

If you are looking forward to lowering your risks and volatility as investors, you can invest in dividend mutual funds. However, if you are an aggressive growth seeker, you can add it to the investment portfolio.

Q3. What is dividend yield?

The dividend yield is the amount of dividend paid per unit or per share divided by the market price of such shares.

Q4. Is there an exit load for dividend yield funds?

When you sell mutual fund units, you will normally be charged an exit load. The percentage of exit burden is determined by the scheme's parameters.

Q5. Can the dividends declared by the underlying company be re-invested in the fund?

Yes, it can be reinvested. But it is also based on the guidelines and type of fund at the fund manager's discretion.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.