Skip to main content

Top 5 Mutual Fund Monthly Income Plans (MIPs)

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 Monthly Income Plans (MIPs)

 

Top performing mutual fund monthly income plans (MIPs) have beaten Post Office Monthly Income Scheme (MIS) in terms of annualized returns over the last 5 years, by investing a small part of the corpus in equities which can give higher returns than fixed income investments. The value proposition of the mutual fund aggressive MIPs is that, the interest from debt investment is supplemented by an additional boost to equity returns. Mutual Fund MIPs have the following advantages compared to Post Office MIS

  • Liquidity: Mutual fund MIPs are more liquid than Post Office MIS (POMIS). For premature withdrawals, Post Office MIS are subject to a deduction of 2% of the amount invested if such a withdrawal happens within three years of investment. After three years, the amount of deduction is 1% of the amount invested. MIPs, on the other hand, charge 1% exit load for redemption of units within one year of allotment. There is no exit load, if the units are redeemed after 1 year

 

  • Tax Consequence: The interest income from POMIS is taxed as per the income tax slab of the investor. If the investor is in the highest tax bracket, their monthly income for Post Office MIPs will be taxed as 30.9%. On the other hand monthly dividends from the mutual funds MIPs are tax free in the hands of the investor, even though the fund has to pay a dividend distribution tax. Due to the change in the methodology of calculation of Dividend Distribution Tax (DDT) announced in this budget, the effective dividend distribution tax paid by the fund will increase. In the previous tax regime, DDT was levied on the net dividends (after DDT) paid to the shareholders. As per this Budget, DDT will be levied on the gross amount, i.e. the dividends declared before DDT. This will certainly impact the returns for the MIP investors. However, mutual fund MIPs will still be more tax efficient than Post Office MIS, for investors in the highest tax bracket.

 

  • Maximum Investment: The maximum investment limit in Post Office MIS is only Rs 4.5 lacs in one account in POMIS, or Rs 9 lacs if the investor is investing in a joint account. There is no such limit on investments in MIPs. Therefore, it makes more sense for investors with higher investible corpus to invest in mutual fund MIS.

However, mutual fund MIPs are not as popular as Post Office MIS due to the following drawbacks:-

  1. The distribution reach of mutual MIPs is nowhere as extensive as that of Post Office MIS. The postal network in India is vast and reaches even villages. The distribution network of Mutual Fund is quite limited compared to postal network.

 

  1. Even though monthly dividend options of MIPs aim to pay dividends each month, they do not guarantee monthly payments to investors. In equity market downturns, it is common for mutual fund MIPs to miss out on monthly dividends. Even if they pay monthly dividends to the investors, the amount of monthly dividends is not assured. Post Office Monthly Income Scheme (POMIS), on the other hand, offers guaranteed 8.5% annualized returns to investors.

These drawbacks can be somewhat addressed by the mutual fund industry by expanding its distribution reach and through sustained investor awareness and education programmes. If investors are willing to take small amounts of risks and sacrifice guaranteed monthly income then mutual fund MIPs can provide greater returns in comparison to post office MIS. In this article, we will review the top 5 Monthly Income Plans, based on the most recent CRISIL ranking (March 2014).

CRISIL ranks equity funds based on several parameters like average 3 year annualized returns, volatility, portfolio concentration risk (both industry and company), debt asset quality and portfolio liquidity (both debt and equity) risk. On each of these parameters, each scheme is accorded a cluster rank (from 1 to 5) relative to its peer group. To derive a composite cluster rank, CRISIL has assigned different weights to each parameter, with average 3 year annualized return given the highest weights at 50%, volatility 30%, industry concentration risk 10%, company concentration risk 5% and liquidity risk 5%. The period of analysis is broken into four periods, latest 36, 27, 18 and 9 months. Each period is assigned a progressive weight starting from the longest period as follows: 32.5%, 27.5%, 22.5% and 17.5% respectively.

Review of Top 5 Mutual Fund Monthly Income Plans

  • Birla Sun Life MIP II - Wealth 25 Plan (CRISIL Rank 1): This scheme was launched in Apr 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme.

The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 29% equity, 67% debt and 4% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.

  • UTI MIS Advantage Plan (CRISIL Rank 1): This scheme was launched in Dec 2003. Please see the chart below for the one, two, three and five years annualized returns from this scheme.

The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 25% equity, 56% debt, 14% money market and 5% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.

  • Canara Robeco Monthly Income Plan (CRISIL Rank 2): This scheme was launched in July 1988. Please see the chart below for the one, two, three and five years annualized returns from this scheme.

The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 25% equity, 67% debt, and 8% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.

  • HSBC MIP Savings (CRISIL Rank 2): This scheme was launched in Feb 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme.

The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 25% equity, 69% debt, 3% money market and 3% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.

  • ICICI Prudential MIP 25 (CRISIL Rank 2): This scheme was launched March 2004. Please see the chart below for the one, two, three and five years annualized returns from this scheme.

The minimum investment in the scheme is Rs 5,000. The asset allocation of the portfolio is 24% equity, 72% debt and 4% cash equivalent and others. Please see the chart below for the monthly dividends declared by the scheme, on a per unit basis, over the last 5 years.

Conclusion

Top performing monthly income plans from reputed fund houses, have provided good monthly income especially compared to post office MIS. Investors who are willing to take a bit of risk, can opt for mutual fund MIPs for getting higher returns associated with the equity portion of the portfolio mix and the greater tax efficiency associated with MIPs for investors in the highest tax bracket. Investors should consult with their financial advisers, if mutual fund MIPs are suitable for their income needs.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

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

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

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

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
      2. Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

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