The main goal of a Monthly Income Plans (MIPs) is to provide a steady source of income, either in the form of dividends or interest payments. MIPs are an extremely popular mutual fund strategy that invests in debt and equity instruments, with the purpose of producing regular cash flow and preservation of the original investment.
AMCs pay the investors regularly, from the profits generated based on the performance of the fund. Investors are advised not to take Monthly Investment Plans as guaranteed results – sometimes the fund might perform poorly, and not generate returns at all. However, this is a viable mode of investment to get returns every month.
In this post, we’ll go through everything you need to know about Monthly Income Plans and the best MIPs you can invest in. Read on!
Monthly Income Schemes (MIS) or Monthly Income Plans, are usually debt-oriented funds (with about 80% of the fund being invested in debt funds), with exposure to stock options. The goal is to earn steady monthly returns, preserve investments, and capitalize wherever possible through equity exposure.
There are two broad types of Monthly Income Plans:
|S. No.||Fund||Risk Factor||5 Year Returns|
|1.||Aditya Birla Sun Life Regular Savings Fund||Low to Moderate||5.5%|
|2.||Baroda Pioneer Conservative Hybrid Fund||Low to Moderate||6.7%|
|3.||DSP Balckrock Regular Savings Fund||Low to Moderate||4.5%|
|4.||HDFC Hybrid Debt Fund||Low to Moderate||5.06%|
|5.||ICICI Prudential MIP 25||Low to Moderate||7.7%|
|6.||ICICI Prudential Monthly Income Plan||Low to Moderate||9.1%|
|7.||Invesco India Regular Savings Fund||Low to Moderate||6.9%|
|8.||Reliance Hybrid Bond Fund||Moderate to High||1.65%|
|9.||UTI Regular Savings Fund||Low to Moderate||4%|
Also Read: Top 8 SIP Plans To Invest in India In 2022
Monthly Income Plans have the following benefits that you can enjoy.
MIPs are primarily targeted towards retirees who don’t want to eat away at their retirement fund through constant withdrawals. MIPs will allow retirees to earn a healthy, regular return on their corpus, all the while protecting the initial investment. These schemes offer retirees a source of income every month, helping them sustain their lifestyle, all the while having the rest of the funds for any emergencies.
MIPs are not strictly only for retirees though, as the benefits and risk profile is highly suitable for any conservative investor looking to earn a decent return over a short period of time.
Monthly Income Schemes are taxed just like other non-equity oriented mutual funds. Any gains made from the disposal of the investment (through selling or otherwise), before a period of 36 months from the date of initial investment – the entire amount of gain will be taxed according to your tax bracket. However, if done after a period of 36 months, only Long Term Capital Funds would be attracted, at the rate of 20% with indexation benefits.
The dividends received monthly from the AMC, on the other hand, is tax-free at the hand of the investors. The AMC is subject to pay a 25% dividend distribution tax though, and that might add to the cost of maintaining the mutual funds.
When investing in a monthly income plan, here are some of the things that you should consider.
If you’ve retired from your 9-5, and are in the “preserve capital” at all costs mindset, Monthly Income Plans are made just for you. However, if you’re looking to exponentially generate wealth in the long run, low-cost index funds like the one on offer at Navi might be more suitable for you. Start investing with Navi Mutual Funds.
*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.