What is the difference between dividend and growth options while selecting a mutual fund?

Following are the differences between a growth and a dividend option in a mutual fund–

In dividend option plans, the dividends are distributed to the unitholders, so the NAV falls after dividends are distributed, but in the Growth option, the dividends are reinvested in the fund, so the NAV increases.
In the dividend option plan, the total return is less than the growth plan because of periodic payouts. On the other hand, the total return of the growth option is much higher because of the long-term investment horizon.
In the dividend option plan, taxes are applicable as per the income tax slab of the investor. But in the growth option plan, the short-term & long-term gains tax depends on when you redeem your units.
Investors who need regular cash flow should go for the dividend option, but those who want to create a corpus for long-term goals should go for the growth option plan.

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