Mutual fund dividends need to die. They should be abolished and replaced by specially designed withdrawal plans that investors can choose according to their needs. That sounds like a radical suggestion but actually it’s not because financially, there is already no such thing as dividends in mutual funds. What are called dividends are exactly what I’m suggesting—withdrawal plans. Except that currently, they are misnamed dividends and are arbitrarily structured by mutual funds to suit their own marketing needs.
The so-called dividends from mutual funds serve no purpose. They are artificial and misleading marketing tools. Worse, starting this year, new taxation rules mean that equity fund dividends also lead to investors paying more tax than they should. If you have opted for the dividend option of a fund, you are almost certainly paying needless tax.