How these monthly income plan (MIP) plans serve the needs of those looking for capital preservation with a steady income
A monthly income plan (MIP) is a good investment option among mutual funds. Individual investors are perpetually in search of investment avenues that yield good and regular returns. MIPs have been floated by various mutual funds. These plans are picking up fast. Investments of these plans in equities have increased. They have increased their allocations towards equity in their portfolios. Mutual funds have been focussing on the individual investor segment. A MIP is among the best products available to the individual investors.
Most of these plans offer three options -
- Monthly income,
- Annual income, and
- Cumulative income
The face value is Rs 10 per unit. Generally, the minimum investment is Rs 10,000 in case of the cumulative option, while there is no maximum limit.
As is applicable to other schemes, the returns from these schemes are not guaranteed. The rate of return is as uncertain and variable as in any other scheme. However, going by the nature of these schemes, investors can expect them to yield a reasonable rate of return. The returns are dependent on the performance of the economy and the corporate sector, as well as the movements in the stock markets. There are no guaranteed returns. However, the equity component of the fund could make all the difference. With a healthy growth in the corporate sector, the returns on MIPs will also go up.
These are income-oriented plans, which aim at meeting the needs of investors by providing a regular income on a monthly, annual or cumulation of income basis over a specified period of time. Income distribution rate is reset every year and announced. In some cases, the rates are assured for the full tenure of the plans as per provisions of the schemes.
For cautious investors, it is best to either invest in balanced funds or in a MIP. The plans have the option to invest up to a particular percentage of the corpus of the fund in equity. The balance is set aside in debt products. Investors can expect a decent return from the investment. MIPs are good for all - working and retired investors. MIPs also come with various options. You can either opt for a monthly income or for the growth option.
MIPs are suitable for conservative investors, who along with an exposure to debt, do not mind a small exposure to equities. These funds aim to provide consistency in returns by investing a major part of their portfolio in debt market instruments with a small exposure to equities. These are suitable for conservative investors, who along with protection of capital seek some capital appreciation, as MIPs have an exposure to equities.