With mutual funds, encashing your dividend is better than reinvesting it
There’s also the issue of time value of money. Ideally, your savings should always earn interest. If you encash your dividend, your money does not earn interest for a few days. Under SEBI regulations, an AMC must dispatch dividend warrants to unitholders within 42 days of the date of declaring the dividend. It then takes three-four days for the funds to be transferred to your bank account. In the interim, you do not earn any interest. In the reinvestment option, however, the dividend is automatically invested back in the scheme on the dividend declaration date itself, and continuously earns interest.
