Ch.2 · Advantages and Limitations of Mutual Funds · medium
Why does the NAV of a scheme fall after an IDCW (dividend) payout?
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EXPLANATION
When a mutual fund declares an IDCW payout, the distribution amount is paid out from the scheme's corpus. This reduces the total assets of the scheme, which directly reduces the NAV by the per-unit distribution amount. This is why dividend payouts are not 'free money' — they are a return of capital.
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