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

NPS Investment Choice for Safe Investors

Invest NPS Online       Whether they invested through SIPs or put in a lump sum amount, risk-averse individ uals have earned the highest returns. These are investors who stayed away from stocks and divided their NPS corpus between G class gilt funds and C class corporate debt funds. On average, gilt funds have given 9.75% annualised returns while corporate debt funds have churned out more than 11% in the past five years. As a result, the average return for ultra-safe investors in the past five years is in double digits. Even in the short term, ultrasafe investors have been the biggest gainers among NPS investors. Will the good times continue? The gilt funds of NPS are holding long-term bonds with an average maturity of over 19 years and a modified duration of about 9 years.These funds have done well because interest rate cuts have pushed down bond yields. But experts say this trend will not stay forever. NPS is a long-term investment and the bonds are predominantly held to matu...
Read more

Buy Health Insurance Plan even if you are covered with my Employer

Buy Health Insurance Plan Online Yes, getting a private insurance cover now, which extends beyond your retirement age, is recommended There are a few reasons why buying a health insurance plan may make sense even though you get medical insurance from your employer. Here are the points you need to think about. Firstly, your employer's insurance coverage will only protect you as long as you are employed with the company. The policy will terminate when you quit the job or when you retire. Post retirement is perhaps the phase when one needs it the most but you won't have it then. Moreover, buying a new insurance policy after the age of 50 means that there will be no coverage for pre-existing diseases.   Lastly, health insurance policy you get from your employer may or may not cover your dependants. ------------------------------ ----------------- 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 M...
Read more

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...
Read more

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...
Read more

AXIS Long Term Equity Fund - The Best Tax Saver Fund for 2016

  AXIS Long Term Equity Fund - Invest Online   History:   The open ended mutual fund was launched on December 21 in the year 2009. It is benchmarked against BSE 200 and managed by the fund manager JINESH GOPANI. Initially the scheme was called as Axis tax saver fund but later it was renamed as Axis long term equity fund with effect from September 2, 2011. Nature of investment: As far as asset allocation is concerned, 97.52% of the stocks are equity and 0.02% is debt based. The primary focus of the fund is to invest in diversified equity stocks that have higher growth potential. Total asset size of the fund is in the tune of 4,996 CRORE as of June 30, 2015. Performance: The performance of the fund for one year, 3 years and 5 years are 23.6%, 29.9% and 19.1 respectively which are far greater than 6.4%, 14% and 5.6% benchmark figures. It has also preformed fairly well against SBI magnum Tax Gain (G) and HDFC tax saver (G). The growth comparison is enumerated below;                        ...
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