Dividend stripping is a financial technique used by investors to optimise their taxes when investing in mutual funds. It is the process where a person purchases units of a mutual fund immediately before the record date for dividend distribution and sells them shortly after the dividend is paid. The purpose of the exercise is to receive the dividend amount which is tax-free in some situations and potentially benefit from capital gains tax advantages. It is very important for investors to understand the concept of dividend stripping in mutual funds while trying to maximise returns from investments and effective management of taxes. If you are wondering what is dividend stripping, the following sections have got you covered.
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