InvestorQ : How can I calculate return on mutual funds under the reinvestment plan?

How can I calculate return on mutual funds under the reinvestment plan?

3 years ago
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Reinvestment plan means a plan under which all the dividend received on mutual funds is again used to buy additional units of mutual funds at prevailing NAV (Net Asset Value).

Let us understand this with an example,
A mutual fund having 300 units has a NAV of Rs.8.75 at the beginning and Rs.9.45 at the end of the year.

The mutual fund manager has two options:
Pay Rs.0.75 per unit as dividend and Rs.60 as Capital Gain, or – (General Plan)
Both the above distributions are to be reinvested at a NAV of Rs.8.65 p.u. (Reinvestment plan)
Under the general plan, the return is calculated according to the common formula:
HPR(%)= NAV at end- NAV at beg +Dividend + Capital Gain/NAV at beg
With the use of above formula return under a general plan is =23.43%
Now, to calculate return under reinvestment plan:
At first one has to calculate total distribution to be reinvested:
(.75+.60)*300 = Rs.405/-