In mutual funds, IDCW stands for Income Distribution cum Capital Withdrawal. It was previously known as the "Dividend" option. Under this option, the mutual fund distributes a portion of its profits to investors from time to time.
Here’s how it works:
1.Income Distribution: The fund distributes earnings (such as interest or dividends received from the securities it holds) to investors at regular intervals.
2.Capital Withdrawal: The distributed amount is essentially drawn from the fund’s assets, meaning it reduces the net asset value (NAV) of the units by the amount paid out.
Key points to note:
- IDCW payouts are not guaranteed and depend on the fund’s performance and the surplus available for distribution.
- The payout reduces the NAV of the fund accordingly.
- This option is suitable for investors looking for regular cash flow from their mutual fund investments.
If you don’t need regular income, you may prefer the Growth option, where earnings are reinvested, and the NAV grows over time.
You can explore more here "What is IDCW in Mutual Fund"
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