Deciding whether to bag or mulch lawn clippings can be made in view of which advantages that suits you better.
Grass clippings is not a factor in thatch buildup, nor does it increase the chances of disease. Clippings quickly and completely breakdown if your lawn is mowed at the right height, i.e., it is advantageous to keep more than 1/3 of the total grass height while mowing. Grass clippings also contribute nitrogen and other nutrients that enrich soil, supplying additional useful organic materials. As much as 1-2 pounds of nitrogen can be added back into the soil from grass clippings from a 1000 sq. ft. lawn
Bagging is advantageous if you have a compost pile. It is not necessary to add clippings to a compost pile each week so an alternating regimen of mulching and bagging may be suitable. Grass clippings can add much needed green-matter to the compost pile. To avoid a strong ammonia odor, grass clippings should be mixed thoroughly with brown matter. Avoid adding to the compost any grass clippings that have had any weed control products applied - wait at least 3 mowings after these products have been applied before composting.