Skip to main content

Conservative Investors can invest in Mutual Fund MIPs Now

Time is ripe for conservative investors to bet on monthly income plans (MIPs) from mutual funds, say investment experts. MIPs, which have been touted as an ideal vehicle for investors looking to take a small exposure in equities, invest 5% to 25% of their corpus in equities and the balance amount in bonds and other fixed income instruments. Though these schemes aim to distribute monthly dividends (hence the name monthly income plans), there is no guarantee on frequency of dividends.


Religare MIP Plus and Taurus MIP Advantage, launched in the last two years, invest a part of their corpus in gold. MIPs offer growth and dividend options. Investors with regular income needs should opt for the dividend option. Dividend declared by these schemes attract a dividend distribution tax of 13.52%. If you opt for the growth option, long-term capital gain tax liability would be lower of 20.6% with indexation or 10.3% without indexation. Interest rates have peaked and are expected to come down. Pressure on corporate margins too is expected to ease. As both equities and fixed income are likely to do well, MIPs are a suitable option for conservative investors now.


While falling interest rates offer capital gains on bonds along with interest, expected increase in stock prices should boost the returns on the equity part of the portfolio. "Interest rates are expected to go down by 100 bps in the next one year. With renewed global investor interest in Indian equities after the recent reform measures, it is a good investment option.


The recent performance of these funds has been very promising. The debt-oriented conservative MIP category has gained 3.65% in three months ended October 25. IDFC Monthly Income Plan leads the pack with 5.62% returns in three months, followed by HSBC MIP Savings with 5.43% returns. These returns are mainly from the equity components of these schemes. S&P CNX Nifty, the market benchmark, has gained 11.66% in three months.


If you are thinking of investing in MIPs, you should look at the fund manager's strategy and asset allocation of the scheme before investing. As you would know a lower allocation to equity means you don't have to face much volatility. As for the debt part of the portfolio, a higher average maturity of the fixed income portfolio would be more sensitive to interest rate changes. If you can digest some volatility due to changes in interest rates, you can look at funds with high average maturity - more than five years - of fixed income portfolios.


He recommends IDFC MIP and Reliance MIP in this space. A point to note is if the interest rates fall, high average maturity portfolios are expected to bring higher returns in the form of capital appreciation. But if rates go up in short-term, such portfolios can show some capital loss too, bringing down the overall portfolio returns. If you are really not keen to expose yourself to interest rate risks, better stick with funds with relatively low average maturity of fixed income portfolios. Additionally, the fund manager should ideally restrict equity allocation of the fund to large-cap stocks. This conservative strategy may not deliver top of the chart performance for investors but surely minimises volatility in portfolio returns. He prefers HDFC MIPshort term plan and Birla Sun Life MIP-II Savings 5 option in this space.


Market pundits are of the opinion that if you are bullish on gold in the medium term, you can consider schemes that invest a part of the portfolio in gold. But those bullish on equities should invest in traditional MIP schemes that invest in varying combination of fixed income and equities. MIPs should deliver healthy risk-adjusted returns, comfortably beating fixed deposits in two to three years.

 



Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

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

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 FundsInvest Online
      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 FundsInvest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap FundsInvest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap FundsInvest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector FundsInvest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...
Read more

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...
Read more

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...
Read more

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Read more

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...
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