Skip to main content

How to manage monthly income funds Swings?

Invest Mutual Funds Online

Download Mutual Fund Application Forms

ONE type of fund that has to face high expectation from investors is monthly income plans as they are meant for a specific purpose. Investors looking to get a regular return from these funds are the ones who invest in them and then they expect that there will be a monthly payout that they will receive. However, this might not work out as expected and there are times when the investors are left wondering how they should try and recover their position.

Here is a look at the issue and what can be done by the investors.

Nature of funds: Monthly income plans are those funds that seek to generate a regular income for their investors. A major difference in this route is that there is no guarantee of income, and, hence, this is just a target that the fund seeks to achieve. To ensure that this is the case, it will invest a majority of its corpus, which can go even up to 90 per cent of the total amount available for investment into debt instruments, and the remaining figure will be invested in equities. The debt portion is expected to provide the required amount of stability, while the equity portion will provide the growth potential to the overall portfolio.

Poor performance: If all goes well, then there is no cause of concern for investors, as they will get a regular payout at the end of each month. However conditions are not always favourable for the fund, and, hence, there are times when the end performance is slightly worse than expected. This can happen either due to a very poor performance from the equity or the debt side, or, in some cases both the assets might not be doing too well. In such a situation the returns could be very low or in some cases even negative as far as these funds are concerned. Investors in such a situation might not get the required amounts that they might be expected as the regular return and this is a condition that they must prepare for.

Dividend low: When this happens there is a direct impact on the dividend that is declared by the fund. The manner in which investors usually get a regular return from the fund is by selecting the dividend option, whereby, the payout comes regularly each month. When the returns are weak, there could be some months when the dividend is skipped by the fund, as there are not enough amounts available for distribution. There is also the quarterly dividend option that is present and if this is the option chosen, then this could also result in a situation where the figure of dividend is negligible.

The moment there is a dip or no dividend that is paid then the performance needs to be checked to see the exact position and how this will actually be tackled in the days ahead.

Investor action: There are couple of things that the investor can undertake when they are faced with this kind of position. In the first option, they can evaluate the position and if they feel that this will improve soon, then they can continue to hold their units, but if, the feeling is that this is not likely to improve as the expectation from the different markets is poor, then alternatives need to be found. The amount can then be transferred to some other area where there is a larger potential to earn some returns. There is also a challenge of finding some other route that will provide for some kind of regular income, and, hence, this will require some effort.
 

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

--------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

 

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

 

Best Performing Mutual Funds

    1. Largecap Funds:
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    3. Mid and SmallCap Funds
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    4. Small and MicroCap Funds
      1. DSP BlackRock MicroCap Fund
    5. Sector Funds
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    6. Gold Mutual Funds
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...
Read more

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...
Read more

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...
Read more

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now