In this article we have covered the following aspects of any MIP:
1. What are Monthly Income Plans?
Monthly income plans fall under the hybrid mutual fund category, and they are essentially debt-oriented. Meaning, the majority of the portfolio is invested in debt and money market instruments, which is why MIP is a moderate-risk scheme. Investors have the luxury of liquidity while having a regular inflow of dividends. However, MIPs are not something that generates a steady and fixed monthly income as the name indicates. Like any market-linked investment tool, dividends are paid out based on profits.2. Who should buy Monthly Income Plans?
MIPs are ideal for those willing to have exposure to equity markets but not willing to take high risk. Majority of the MIP investors are retirees, homemakers, and those about to retire as per the data from the depositories. Basically, monthly income plans are for individuals looking to park their savings to get a regular income. Also, the first time mutual fund investors can consider MIPs as the stepping stone to experience the market.
3. What are the features of Monthly Income Plans?
a. It delivers more returns than other similar schemes such as POMIS schemes and fixed deposits in terms of returns. b. There is no limit on the investment for monthly income plans. c. You do not have to pay any entry load or any processing charges. d. The exit load on MIPs cannot exceed 1%. e. There is no lock-in period for MIPs. f. MIPs offers comparatively high liquidity. h. It is generally recommended to invest when the interest rates are high as it results in a drop in NAV.4. What is the Earning Potential of MIPs?
Investors have two ways to earn dividends and growth of wealth.Dividend | Growth |
The AMC pays dividends from the distributable surplus | No steady inflow of dividends |
Dividends will be paid only when the fund is in profit | The profits get added to the NAV and let the corpus grow |
Regular dividend declaration is not SEBI-mandated | Wealth creation with corpus growth |