What are MIPs?
Monthly income plans are debt-oriented and fall within the hybrid mutual fund category. MIP is a moderate-risk scheme because the majority of the portfolio is invested in debt and money market instruments.
Investors have the benefit of liquidity while receiving monthly dividend payments. However, as the name implies, MIPs do not provide a consistent and regular monthly income. Dividends, like any other market-linked investing instrument, are paid out depending on profitability.
Who should invest in monthly income plans?
MIPs are perfect for those who want to gain exposure to the equity markets but do not want to take on too much risk. According to depositories, the majority of MIP investors are retirees, homemakers, or those preparing to retire. Monthly income plans are essentially for people who want to park their resources in order to receive a regular income. In addition, first-time mutual fund investors might use MIPs as a stepping stone into the market.
Features of Monthly Income Plan
- In terms of returns, it outperforms other similar schemes such as POMIS schemes and fixed deposits.
- There is no investment cap for monthly income programmes.
- You will not be charged an entry fee or other processing fees.
- The exit load on MIPs cannot be greater than 1%.
- MIPs do not have a lock-in period.
- MIPs have relatively high liquidity.
- It is generally advised not to invest when interest rates are high because this results in a decline in Net Asset Value (NAV).
Here are 3 of the top MIPs to consider investing in this year:
1. Birla Sun Life MIP II – Wealth 25 Plan is an investment plan offered by Birla Sun Life.
The minimum amount required to invest in the Birla Sun Life MIP II – Wealth 25 Plan is Rs.1000. Investing in this fund via SIP would also necessitate an amount of Rs.1000. Investors may furnish 6 post-dated cheques to participate in the SIP. The plan allocates 70% to 80% of the capital to money market and debt securities, with the remaining 20% to 30% invested in equity and equity-related assets. Birla Sun Life MIP II – Wealth 25 Plan has an AUM (Assets Under Management) of Rs.2,492 crores.
2. Franklin India Monthly Income Plan – Plan A
This is a balanced debt-oriented fund with a cautious outlook. To invest in this fund, investors must put in a minimum of Rs.10,000, and SIPs must be set up at a minimum of Rs.500 every month. If the plan is redeemed within a year of purchase, an exit load of 1% will apply. Franklin India Monthly Income Plan – Plan A’s portfolio includes stocks such as State Bank of India, HDFC Bank, and Axis Bank. Franklin India Monthly Income Plan – Plan A has an AUM (Assets Under Management) of Rs.412 crore.
3. HDFC Monthly Income Plan – LTP
HDFC Monthly Income Plan – LTP is a balanced debt-oriented aggressive fund. Investors can invest in this fund by first putting in Rs.5,000, followed by Rs.500. If the fund is redeemed within a year of its initial investment, an exit load of 1% will apply. Stocks in the HDFC Monthly Income Plan – LTP portfolio include Infosys, L&T, ICICI Bank, and the State Bank of India.
Advantages of MIPs
- Diversification
- Tax Benefits
- Bonus
- Rebalancing
- Cost-Efficient
- Stable Returns
- Switching
Disadvantages of MIPs
- Involves Risk
- Lack of liquidity
- Misleading by agents
- Irregular Income
