Top Monthly Income Plan/Scheme (MIP) MF’s to invest for 2014
Monthly Income Plan/Scheme (MIP) mutual funds work similar to debt funds, yet they provide regular income by means of dividends. If you are a senior citizen or individual looking for regular dividend income, you can consider monthly income plan mutual funds under your portfolio. In this article, I would discuss about monthly income plan, their features, how they are tax efficient and some of the top monthly income plan mutual funds which you can invest for 2014.
Types of Monthly Income Plan (MIP) Mutual funds
There are 2 types of MIP mutual funds.
a) Dividend option: These mutual funds pay dividend at regular intervals like monthly, quarterly or annually.
b) Growth Option: These mutual funds would not pay you a regular income, but the returns are re-invested. Means your NAV would increase year on year. Generally investors would adopt dividend option as they are meant to provide steady income.
Also read: 5 Best Investments to get regular or monthly income
Points to remember before investing in MIP mutual funds
- Returns or income is not guaranteed. These would depend on the performance of the mutual fund scheme.
- Dividends are paid from returns and not from the capital. E.g. if you invested Rs 10,000 and there are no much appreciation and your money is still Rs 10,000 only, MIP mutual funds would not pay any dividend. They would pay only once your money starts earning returns.
- Returns are tax free, but dividend distribution tax is paid by mutual fund company. Indirectly these are reduced from the overall returns.
- These are liquid investments. You can exit at any time. If you redeem before 1 year exit load is 1% and after 1 year nil.
How is the performance of MIP Mutual funds?
They are providing returns of 8% to 11% returns per annum.
How these Monthly income plan mutual funds are taxed during redemption?
- While returns are tax free in the hands of investor, when you redeem, you may get capital appreciation. E.g. If you invested Rs 10,000 and in one year you would have got Rs 1,000 as dividend income which is paid by the company. Now there is no tax on this Rs 1,000. However when you are redeeming these mutual funds, assume that you would have got Rs 10,500. Means there is a profit of Rs 500 during redemption. This amount would be taxed as below
- If the redemption is < =1 year – Short term capital gain – The amount needs to be added to individual income and tax needs to be paid based on individual income tax slab
- If the redemption is >1 year – Long term capital gain – The amount would be treated as long term capital gain and you need to pay income tax based on that.
How MIP Mutual funds are comparable with other monthly income schemes?
Returns: MIP mutual funds provide returns of 8% to 11% p.a. Bank FD would provide returns of 9% to 10% p.a. and PO MIS scheme provides around 8.5% returns. If you are looking for higher returns by taking some risk, you should consider MIP mutual funds.
Taxation: FD and POMIS returns would be taxed based individual tax bracket. MIP Mutual funds are taxed as DDT – 13.74% which is deducted by the mutual fund company itself. If you are in a high tax bracket of 20% or 30%, the tax component on MIP mutual funds would be low.
Tenure: PO MIS scheme is for 5 years. Bank FD or MIP MF’s can be taken away/redeemed at any point of time with some terms and conditions.
Premature withdrawal: Bank FD can be withdrawn anytime, however pre-closure penalties are being imposed by some banks. PO MIS, you can take out before tenure, however you need to pay 3% of interest if you withdraw between 2 to 3 years and 1% if you withdraw between 3 to 5 years. MIP Mutual funds can be exited within 1 year with an exit load of 1% and beyond 1 year exit load is nil. Hence MIP mutual funds are more flexible to withdraw compared to others.
Top Monthly income plan (MIP) Mutual funds to invest for 2014
Below are the top-8 MIP mutual funds to invest for 2014. You can review and consider them as part of your portfolio.
Also Read: Invest in Tax Saving FD Schemes offering high interest
For whom these MIP mutual funds are suitable?
- Investors looking for steady income
- Best options for conservative investors
- Good for lump sum investments who want to have regular and better income compared to bank FD or PO MIS scheme.
Conclusion: I felt MIP mutual funds are good for investors who are looking for regular income. These scores high compared to bank FD or Post office MIS Scheme. These could be good for retired or senior citizens who might be looking for regular income. Since these are like debt mutual funds, it carries low risk. One should keep this in mind before investing in these mutual funds.
If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.
Suresh
Top Monthly Income Plan/Scheme (MIP) MF’s to invest for 2014
- How to Create a Rs 10 Crore Wealth with Rs 25,000 Mutual Fund SIP’s? - January 13, 2025
- 4.5 Million SIP Closures in Dec 2024 – Should Investors Be Concerned? - January 12, 2025
- 5 Worst Performing Mutual Funds in the last 1 Year [-24% to 0%] - January 11, 2025
Hi Mr Suresh,
How to invest in these plans? is it through SIP and select Dividend option if I need dividend at regular intervals? if my understanding is correct these are like normal equity mutual funds but suitable for short term and for the purpose of monthly income, please clarify
Thanks,
Prashanth
It is like buying any other mutual fund scheme. Login to your demat / mutual fund account and purchase them.
Hi Mr Suresh,
I think I am too late to read this nice article. Today for the first time I have come to know about this MIP MFs. Thanks again. I have a query regarding these recommendations, is the table indicated about still hold good for 2016 as well? or if you have already recommended for 2016 please update me with the link as could not find it.
Thanks again,
Prashanth
Dear Mr suresh
I first time read your articles do found very informative and very practical.They are easy to understand.
Thank you very much
Hello, I am a defence officer and shall be retiring soon on 31 Oct 14 (54 yrs of age). I shall be getting around 60K as my pension (of course taxable)wef Nov onwards. In addition, some lumpsum amount about 50L. Two daughters for marriage Kindly advice for a sustained reasonable living :
a) Investment in MIS & Sr Citizens scheme (both 24 L total allowed?)
b) Bank FD
c) Debt funds? which ones?
d) Any other suggestion pl
warm regds,
skt
Hi Thakurji, Investment in POMIS or Zr. Citizen saving schemes are good. There are good debt funds, however now these are being taxed if you withdraw before 3 years. However you can consider SBI dynamic bond fund, Franklin India income fund etc.
Thanks a lot for the advice.
Regds
Sk Thakur
Sir,
I am 37 +
as per my income, i am eligible for 1 crore term insurance maximum.
i want a term insurance for 30 yr.
there are so many plan available with different premium rate.
i am unable to decide the right one for me.
can u plz help me to sellect the perfect one for me
Manas, I don’t think there is any eligibility. It is up to you to take a policy value. Look at this article where I suggested some top term insurance plans. https://myinvestmentideas.com/2013/12/best-term-insurance-plans-in-india/
sir,
I got 1 lac as my gratuity from my previous employeer.
is it good to invest 1 lac in munnapuram secured NCD for 400 days
i want short term investment
i am 37
Hi Manas, Like I say, don’t invest in single option. Invest them into 2-3 options. You can look for NCD, Bank FD etc.
Respected Sir,
I need your advise for lumsum, & MIP investments. My mothly total requirment is IRS.30,000/.for me & my wife. How much & where we can invest. We are both Sinore Citizens & our anual returns are taxable in 1st bracket i.e. 10%
Your
Hi Vilas, Though these MIP mutual fund aims to provide regular income, they may or may not provide monthly income. Hence I feel you should subscribe to monthly schemes like Bank FD (9.5% returns) or Post office MIS scheme (8.5% returns). If you are risk taker you can look for MIP mutual funds (indicated in this article) or debt mutual funds which invests majority in debt related instruments. The returns could be anywhere between 8% to 9%. To get Rs 30K per month you need to invest atleast Rs 30 Lakhs as investment in any of these options.
Hi,
As I am new to this fourm, and also for the SIP MF's. Could you please let me know bit of pros and cons for investing in SIP's for long term. I am interesting to move to the new investment plan like SIP. And also please suggest which is the best company's MF is good to invest for the upcoming year.
Ramesh, There are several advantages for investing in SIP in mutual funds. You cannot time the market, hence you leave the decisions to mutual fund management. They would do the analysis and invest on your behalf. You can invest as low as Rs 500 per month. There are several funds for high risk investors, medium risk investors and low risk investors. You can choose based on your risk appetite.
Dear Mr.Suresh
I hold the following SIP MF since last 8 months and they are not performing up to mark. Kindly advise should i continue with the same or redeem. I am looking for a 10 years period. If you have any specific MF advise on the Plans i should switch, pl. advise :
1. Canara Robeco Equity Diversified – Div
2. ICICI Prudential Dynamic Regular Plan Div – Reinvestment
rgds
D RAGHAVAN
Hi Raghavan, You should not be judging a fund based on 8 months performance. I understood your point. Canara Robeco is average fund. You can stay invested or switch to any other plans like ICICI Pru blue chip focussed fund or BNP Paribas equity fund or UTI Opps fund etc. Second fund ICICI Pru dynamic fund is Crisil Rank-1 fund and shown good performance. You should stay invested in such funds.
Dear Mr.Suresh – Thank you very much for your valuable advise. rgds
Dear Mr Suresh,
I have recently redeemed all my equity MF investements (mostly done by SIP in the last 5 years) and invested in the following Debt funds after considerable research.
Birla Sunlife – Short term fund
ICICI prudential – Long Term Fund
ICICI prudential – Flexible Income Fund
ICICI prudential – Money Market Fund
Reliance Money Manager Fund
SBI Magnum – Monthly Income Fund
SBI Magnum – Dynamic Bond Fund
SBI Magnum – Income Fund
SBI – Premier Liquid Fund
UTI – Treasury Advantage Fund
I found that these are giving consistenetly higher return than MIP. I want regular income (around 9 %) as I have retired recently.and I will not be having any taxable income.
Due to my NIL tax status, will the NCD's with higher interest of around 11 % yield be better that debt mutual funds?
I found that eventhough I have redeemed my equity MF at the Highest NAV (near Sensex 20800 levels), the long term capital gains (indexed) report I generated are showing negative long term capital gains (indexed) for some schemes. I am not able to understand this as all the investments have given good returns (on absolute terms). Is it because it has given less that the 10 % indexation and the negative return is comapared to 10 % compounded yield?
Arun
Arun, here are my comments 1) You have choosen some of the funds which are short term in nature. Means they would provide short term returns. Some times they might be good, sometimes they may not give even bank FD returns 2) If you want regular returns of 9% why are you not going for Bank FD’s where as senior citizen, you can get more than 9.5%. Since you are saying that your income would not fall under taxable, this would be secured investment. You can invest part of your amount in such FD’s 3) NCD’s are little risky as they are like company FD’s, but some may not be secured. You should consider Secured NCD’s. Yes once you do that your money would be secured and you may get up to 11% returns 3) What I see about negative long term capital gains is done after indexation. Indexation is done for debt mutual funds to arrive capital gains. You can see more info about taxation part on this article. https://myinvestmentideas.com/2013/04/how-mutual-fund-returns-are-taxed
Dear Sir,
You have already said that the dividends are paid from returns received by the company and if the concern does not earn profit or faes losses than investor not only will be deprived of the regular income but his investment may also be under risk. A senior citizen like me has no other income for livelihood except the interest erned on the retirement benefit amount received from the employer. If this money do not pay any income or further reduced due to losses to the company then I am nowhere. So, why should i not invest in Bank FDs with a little less interest but almost no risk untill the Bank is bankrupt.
Please clarify and guide for satisfaction.
Yours faithfully
A. Mishra
Hi Ajay, I understand the point what you are making. What I meant here is there is no guarantee of returns. These MF’s would not provide dividends without good returns. This is theoratical. Currently, majority of the MIP plans provide dividends and investors are somewhat happy by choosing good MIP funds. It depends on good performing mutual funds in this segment. After several research, I thought these are good ones. Yes I agree that bank FD’s are always better from fixed returns point of view, but if you want more returns, you can choose them. You can invest for an year in Bank FD + MIP funds and compare how they are performing.
Dear Mr.Suresh
I have been regularly readings your articles on this blogs and find to be very useful. Last year i followed your advise on the best 10 SIPs for 2013 an it is delivering results. This year for 2014 as well expecting your article on top 10 SIP Mutual fund investment (Long term). Over and above this, i seek your advise if you are into offering financial consultancy services for individuals so that i can approach you. Kindly reply. Regards Raghavan
Hi Raghavan, Thanks for your valuable feedback. Yes next month, I am expecting to post a article to cover best investment options to invest for 2014. I myself preparing this from now. As I indicated earlier, I am providing this service out of my interest. Currently, I am not providing financial consultancy services, but I do have plan to do in near future. When I am ready with my team, I would surely approach you. Thanks for keeping the trust with us. You can do a favor by sharing few good articles on your facebook so that your friends you might be looking for such data can benefit. I would also get benefitted with new users and readers. This would be the big gift which you can give it to me.
Dear Mr.Suresh
Thanks for your information. I shall definetely share the article on my facebook. I have also introduced many of my friends to your website and they are benefitting out of this.