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

Rs 14,000 Crore worth of tax free bonds coming soon from NHAI , PFC

  NHAI, PFC file prospectuses, coupon rate not yet decided MORE debt investment options have opened up for investors with AAA rated tax-free bonds worth over Rs 14,000 crore lined up. The National Highway Authority of India ( NHAI ) and Power Finance Corporation ( PFC ) are offering Rs 10,000 crore and Rs 4,033.13 crore worth of tax-free bonds, respectively, as per prospectuses filed with the Securities and Exchange Board of India (Sebi). Of a Rs 5,000 crore issue by PFC, Rs 966.87 crore has already been raised through private placement on September 28 and November 1. Tax-free bonds give investors tax-free return on any amount invested. In another kind of bonds, the long-term infrastructure bonds, investments up to Rs 20,000 are tax exempt, that is this cap amount can be deducted from the taxable income. Accordingly, the NHAI prospectus has clarified that only the amount of interest from -and not the actual investment on -its new bonds will be tax-free. "NHAI's publ...
Read more

Change in Fund Manager for some of HSBC Mutual Fund Schemes

Buy Gold Mutual Funds Invest Mutual Funds Online Download Mutual Fund Application Forms Call 0 94 8300 8300 (India) However, this facility is only available to Unit holders who have been assigned a folio number by the AMC.   HSBC Mutual Fund has announced that the below mentioned schemes shall be managed by the new fund managers as stated in the table. The effective date will be July 02, 2012.   Amaresh Mishra 's will be Vice President and Assistant Fund Manager. Having done a Post graduate diploma in Business Management and Bachelor of Chemical Engineering, he has over seven years of experience in Equities and Sales.   Mr. Piyush Harlalka's designation shall be Vice President- Fixed Income. Qualified as a C.A., C.S. and holding M.B.A.( Finance degree), he has over six years of experience in Fund management and ...
Read more

How EEE and EET Tax affect Retirement Investments

  An important factor while choosing a financial product is its taxation , and for retirement savings, this is even more important as the sums involved are usually life-long savings. Here's a look at the current tax treatment of three major long-term retirement planning products, which are - Employees' Provident Fund (EPF), Public Provident Fund (PPF) and National Pension System (NPS). EPF The tax treatment is EEE, which means your money is exempt from taxes at the time of investment, accumulation and withdrawal. At the time of investment, the tax deduction is under the limit of section 80C of the Income-tax Act , which is currently Rs 1.5 lakh. Partial withdrawals are also tax-free if made after 5 years of continuous service. If withdrawals are made before 5 years of service, 10% tax will be deducted at source. Exceptions have also been provided for transfer of amount and conditions wherein the subscriber is unemployed for more than 2 months or the loss of job was beyond th...
Read more

Personal Finance: You can insure your wedding

But luck may not always be on your side. With the frequency of such attacks, as also other risks and unforeseen accidents growing, a wedding insurance is something you may want to look at if a marriage is being planned in the family. Event insurance plans like this is still in its nascent stages due to low awareness. And given the sacred nature of the ritual, nobody wants to discuss or think negative. But as wedding spends and risks grow, it makes sense to cover the potential monetary loss. The policy in those countries even covers the loss of the wedding ring, the wedding gown not reaching on time and even the expenses/loss due to late or non-appearance of the photographer which may mean staging the event once again for the photograph. In India, most insurance companies — including ICICI Lombard General Insurance, Oriental Insurance, Bajaj Allianz and National Insurance — offer wedding insurance. The policy is tailor made to individual requirements and needs. The sum insur...
Read more

DSP BlackRock MidCap Fund

Best SIP Funds Online   HOW HAS DSP BlackRock Small & Mid Cap Fund PERFORMED? With a 10-year return of 14.61%, the fund has outperformed both the category average (12.34%) and the benchmark (10%) by a good margin. Should you invest in DSP BlackRock Small & Mid Cap Fund? This fund invests predominantly in mid-cap stocks but takes a sizeable exposure in small-caps as well. The focus is on nascent companies with high growth potential. The fund manager places emphasis on quality and avoids inferior businesses even if these look tempting from a valuation perspective. Over the past year, the fund portfolio has grown, having added to some of the underperforming sectors like chemicals and healthcare. Its portfolio churn has come down significantly. The heavily diversified portfolio is run completely agnostic of its benchmark index— most bets are from outside the index—which can at times lead to bouts of underperformance as seen in the recent years....
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