Dividend vs Growth

Difference Between Dividend and Growth

In case of the dividend, the excess return that is earned on the stock is declared and shared with the investors and the excess of profits are withdrawn only as dividends whereas in the growth model, the excess return that is earned is re-invested and the profits are materialized only when the same are redeemed or sold.

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There are two types of investment sets – Growth and Dividend. Both types of investments have their advantages and disadvantages. The investment type depends on the investment horizon and circumstances and the objective of the investment for which the investment has been made.

Generally, the term growth and dividend are used in the mutual fund’s world where these are the two kinds of mutual funds currently available in the open market.

Dividends vs Growth Infographics

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Key Difference

Dividend vs Growth Comparative Table

Shorter time horizon as cash inflow is regular.Longer time horizon as cash flow is only at the end of a period.
Cash inflow from the stock at periodic intervalsCash inflow at redemption or sale only.
A release of excess returnRe-investment of excess return
The money received is tax-free at the hands of a unitholder.The money is only tax-free in some schemes of mutual funds if you can stay invested for 15 years or more.
Dividend stocks offer consistent cash flow, which is potentially less risky than growth stock because the investor is getting money at regular intervals.Growth stocks have the potential for higher returns for investors. Growth stocks are compatible with those investors who are not looking for instant cash flow and are looking to stay invested for a longer time.
They generally outperform growth stocks.They generally underperform than dividend stocks.
The investor losses on the compounding of the excess return of the stock as the money are withdrawn in the form of dividends by the investor.The excess profits get compounded and stay re-invested, which in return increases the value of the investment and is compounded every period.

What Option to Choose?

Whether to opt for dividend or growth funds, it depends on the investor time horizon, the risk preference, and the kind of return that he is looking for. Investors looking to create wealth for a longer-term horizon should invest their proceeds in growth to stay invested and enjoy more extended returns. Undergrowth investment, you will not receive any immediate return or any payment in kind of interest. Still, your investment will multiply over the years, whereas, on the other hand, dividend investment is for those kinds of investors who are looking for fixed and steady cash flow over the years.


In reality, no mutual fund or investment is perfect or always rewarding in nature. But investing should be a habit who wants to make their future secure and achieve some goals out of that investment, which can make a better future for them.

But as we all know that the return is fluctuating and depends on the market sentiments, the company’s investor relation, a company’s fundamental and other external factors. As per the data of S&P’s 500 index performance, dividend stocks tend to outperform the broader stock market and the growth stocks. Dividend stocks have the power to generate superior returns over growth stocks.

If an investor is planning for investing in short-term and less risk, he should invest in debt mutual funds. If an investor is looking for superior returns, short-terms and high-risk equity mutual investment are what he should opt for. Mutual fundsMutual FundsA mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks.read more should be selected according to the goals and needs of the investor.

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