Monthly Income Mutual Funds
MIP or Monthly Return Mutual Funds refer to the plan where the investor can get good returns. It is a wonderful alternative as it helps in getting better returns in comparison to the post office Monthly Income Scheme (MIS). Mutual Funds Monthly Income Plans offer monthly return through the amount offered regularly by the companies to all its shareholders based on profits coming out of the performance of the Mutual Fund. There are several monthly income mutual funds available in the market and the investors can choose the one as per his/her own objectives. However the best monthly income plan is the one which offers maximum returns with minimum risk.
There are two types of monthly income plans, Aggressive MIP Mutual Funds and Conservative MIP Mutual Funds. In the Aggressive Mutual Funds Monthly Income Plans, 30% investment is made in equity and the remaining 70% investment is made in debt instruments. It is ‘high risk high return investment’, i.e. it is highly risky but it brings about better returns. The investment for Conservative MIP in equity is 20% and 80% is in the debt instruments. Conservative mutual funds monthly income plans are ideal for low risk taking investors. Conservative MIP brings about less return in comparison to aggressive MIP mutual funds.
Options Available in Mutual Funds Monthly Income Plans
MIP with Dividend Option
Monthly income mutual funds with dividend options helps in ensuring regular income low as dividend. The investor can select the frequency of dividend payout, viz. monthly, quarterly, yearly, and half yearly basis, while making the investment. It is ideal for those who are looking for regular income flow.
MIP with Growth Option
MIP with Growth options helps in capital appreciation. It means that the capital amount will grow if you select the growth option. The advantage of this appreciation can be enjoyed at the time of redemption of the plan in future. For all those who are not looking for regular income flow can ensure heavy return by selecting the growth option.
Mutual Funds Monthly Income Plans (MIPs) are ideal for all those who are seeking regular flow of income. The monthly income mutual funds are in a way debt funds as most of the amount is invested in debt operations. For the aggressive Monthly Income Plans, 16%-30% is invested in equity securities, while the remaining amount is invested in the debt securities. However, such a plan can be risky for retired people and those who want to play safe.
Following are some best monthly income plan which helps in ensuring steady income in 2020:
Birla Sun Life MIP II – Wealth 25 Plan
Birla Sun Life MIP II – Wealth 25 Plan is a hybrid debt oriented aggressive Mutual Funds Monthly Income Plans. The plan has been able to secure returns of 2.12% in just the last one year. It is one of few lucrative plans which are able to secure 12.61% in the last five years. The initial investment can be as small as Rs. 1000, followed by investing Rs. 1000 in the Systematic Investment Plan. Six posted cheques can be provided by the investors for the systematic investment plan. The plan has allocated 70%-80% in debt and other money markets and 20%-30% in equity and other associated instruments. The management has assets worth about Rs 2,321 crores under it. It is a good hybrid debt plan for investing.
Franklin India Debt Hybrid Fund
Franklin India Debt Hybrid Fund is a hybrid conservative debt oriented plan. It has brought an average return of 9.35% in just the last five years. The investor can initiate the plan with minimum Rs. 10,000 followed by monthly SIP of Rs. 500. One Percent exit load is imposed if redemption is made within one year. The growth plan has NAV of Rs. 52.87 and NAV for the dividend plan is Rs. 12.91. The initial investment can be Rs.100 followed by Rs. 500. The stocks of renowned companies like Axis Bank, Bharti Airtel, HDFC Bank and State Bank of India are part of its portfolio. The management has a small asset of Rs. 386 crores.
ICICI Prudential Ultra Short Term Fund
ICICI Prudential Ultra Short Term Fund is a hybrid conservative debt oriented fund. A huge amount is invested mainly in debt oriented securities. The plan consists of shares of Reliance Industries, Tata Steel, Larsen and Toubro and Axis Bank. ICICI Prudential Regular Income Fund has been able to bring about returns of 6.50% in the last five years. The dividend can be paid on quarterly basis if opted by the investor and has an asset value of Rs 10.61.The growth option has the NAV of Rs 17.80. Although it will not bring about heavy gains but for the investors taking cautious strides it is a safe plan to invest in.
HDFC Hybrid Debt Fund
HDFC Hybrid Debt Fund is a hybrid debt oriented aggressive Plan. It is a fund with a good ranking. The plan is able to bring about average returns of 9.80% for the last five years. This mutual funds monthly income plan was introduced in 2003 and has brought about returns of 10.47% since then. The initial investment amount is Rs. 5,000 followed by monthly Rs. 500. For the redemption made within one year, the exit load is 1%. Its portfolio consists of stocks of companies such as ICICI Bank, State Bank of India, L&T, Infosys etc. It is also heavily exposed to securities and bonds of the government of India.
ICICI Prudential Regular Savings Fund
The plan ICICI Prudential Regular Savings Fund was introduced in 2004 and has brought returns of 10.21% since its launch. The initial investment for the plan is Rs. 5000. It has brought average returns of 9.38 in the last three years. Its portfolio consists of stocks of renowned companies like Motherson Sumi, HDFC Bank, Maruti Suzuki, TVS Motors, etc. The fund has exposure to 7.61 percent GOI 2030 and 7.88% of security of government of India.
UTI Regular Savings Fund – Regular Plan
The plan UTI Regular Savings Fund – Regular Plan has brought about returns of 9.97% since its launch. The initial investment for the plan is Rs. 5000. The plan has brought about a typical return of 8.58% in the last three years. The portfolio of the plan consists of stocks of well-known companies such as Bajaj Finance, Yes Bank, IndusInd Bank and Infosys. The fund is considered to be a benchmark against the Crisil MIP Blended. It comes under the Debt-Oriented Conservative category. It has exposure to India securities of the government of India.
Reliance Hybrid Bond Fund
The plan Reliance Hybrid Bond Fund has given returns of 11.21% in the last 10 years. The initial investment amount is Rs. 5000. The fund has brought a typical return of 6.84% in the last three years. The portfolio of the plan consists of stocks of Infosys and HDFC bank. The plan has debt exposure which includes the likes of 8.17% Government of India 2044.
These were some MIPs from which you can choose the best monthly income plan. However, you need to carefully read the company’s portfolio and returns for playing safe. It is almost important to learn about the taxation policies for these mutual funds monthly income plans. Here is some information about taxation of MIPs.
Taxation on monthly income mutual funds
Taxation on MIPs is more efficient in comparison to those of the bank deposits. These mutual fund schemes are debt oriented, hence, rules by the principles of mutual fund taxation. For example, the investors have tax free dividends. Conversely, any profit generated by the investor on selling it before a year is considered as Short-Term Capital Gain and the tax liability on it is the same as that for that for the income-tax slab to which he/she belongs. For this reason, caution is needed regarding taxation before making such investments. For all those who want to avoid such risk, should opt for the plans with little or no such risks.
Why to invest in mutual funds monthly income plans?
Now the question arises what is the need for investing in mutual funds monthly income plans. Here are some regulatory expenses which can be met with MIP:
- For offering pocket money to children: Providing a fixed pocket money to the children is a regular expense. Yes, you can pay it through your regular income also. But a smart investor will manage such expenses by investing in a MIP which will offer regular flow of income. In this way you can easily manage such expenses without making it heavy on your pocket.
- Annual Vacation: It is quite important to take a break and enjoy a vacation. However, such a plan can be made without altering the regular budget by investing in the suitable MIPs.
- Regular flow of income after retirement: The retired persons can ensure regular flow of income by investing in monthly income plans of mutual funds. Believe it or not, MIPs are always better than fixed deposits and MIS. Financial security can be enjoyed with ease by investing in MIPs.
monthly income mutual funds are a great way to invest for ensuring steady income flow. If you are looking for investing in fixed deposits, our advice will be to think about monthly income plans before making the investment decision. However, the plan should be selected on the basis of need, i.e. regular income or heavy returns. Moreover, the investor should properly study the company portfolio and the policies before making the investment.