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

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Read more

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
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