Mutual fund growth vs IDCW plans: Top 5 schemes’ returns compared, NAV differences — What investors should know

If you invest in mutual funds, you may have noticed two options under the same scheme: Growth and Income Distribution cum Capital Withdrawal (IDCW). While both options invest in the same underlying portfolio, they differ in how earnings are handled, which can affect your cash flows, the number of units you hold, and the way your investment grows over time.

Understanding these differences is important when comparing mutual fund returns. A higher or lower Net Asset Value (NAV) does not, by itself, indicate which option has delivered better returns. Investors must also account for distributions and the reinvestment of payouts.

Growth option: Under this option, earnings remain invested in the scheme rather than being distributed to investors. The value of the investment grows or falls with the scheme's performance, reflected in its NAV. Investors realise gains when they redeem their units.

IDCW option: Under this option, the mutual fund may distribute a portion of its distributable surplus to investors, subject to availability and the scheme's terms. The amount distributed is not guaranteed, and the NAV falls by an amount corresponding to the distribution, all else being equal.

The Securities and Exchange Board of India (SEBI) renamed the dividend option as IDCW, effective April 1, 2021, to clarify that distributions may include both income and capital. Therefore, an IDCW distribution should not automatically be viewed as additional profit.

IDCW has two common variants. Under the IDCW Payout option, the profits are paid to the investor, and NAV falls. Under the IDCW Reinvestment option, the distribution is used to purchase additional units for an investor. This increases the number of units the investor holds, while the NAV of the fund reduces by the payout amount.

In a Growth option, earnings remain invested in the mutual fund scheme, contributing to its NAV and allowing returns to compound over time. In an IDCW Reinvestment option, distributions declared by the scheme are used to purchase additional units at the applicable NAV.

The table below shows the returns and NAVs of the schemes across their Growth, IDCW Reinvestment (IDCW-R), and IDCW Payout (IDCW-P) options.

*Source: Morningstar, Data as on 19 October 2026

The three Bank of India Small Cap options and the three TrustMF Small Cap options reported identical returns across their Growth, IDCW Reinvestment, and IDCW Payout options.

For Motilal Oswal Focused, the Growth option delivered a year-to-date (YTD) return of 20.29%, compared with 19.91% for both IDCW options.

However, the NAV figures show notable differences across some options. Bank of India Small Cap’s Growth option had a NAV of ₹64.89, compared with ₹48.60 for both IDCW options.

Similarly, Motilal Oswal Focused’s Growth option had a NAV of ₹62.33, while its IDCW Reinvestment and IDCW Payout options had a NAV of ₹25.62. TrustMF Small Cap’s NAV was ₹13.49 across all three options.

These differences do not necessarily indicate that the Growth option has performed better. NAV represents the per-unit value of a scheme, not the investor’s total return.

Over the long term, the growth option can help investors build a larger corpus by keeping earnings invested and allowing them to compound. Under the IDCW Payout option, distributions are paid to investors, reducing the amount retained within the scheme.

The choice depends on the investor's cash-flow needs and investment objective. Investors seeking long-term wealth accumulation may find the growth option simpler because earnings remain invested. Those who prefer periodic cash distributions may consider IDCW.

Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.

Get Latest real-time updates

Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

HomeMoneyPersonal FinanceMutual fund growth vs IDCW plans: Top 5 schemes’ returns compared, NAV differences — What investors should know

✕

Wait for it…

Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.