If you are looking for monthly income return by investing one time & expecting a return better than Fixed Deposits without taking much risk, then the solution to all your anxieties is Monthly Income Plans (MIP).
Monthly Income Plans are hybrid investment options which invests majority of their portfolio holdings in debt oriented instruments like Government securities, bonds, certificates & around 20-25% of their holdings in equity oriented instruments. Through this plan, one can choose to opt for monthly, quarterly or yearly dividends though fund managers prefer to focus on disbursing monthly dividends as per the name suggests.
The very important question in every investor’s mind-Are Monthly Income Plans are risk free. In one word, I can say “NO” If you are looking for ultra low risk or without risk instruments, then don’t think twice, go to a bank & enjoy 8% returns & sit at home.
But if you are looking for 12% returns by investing 25% of the Portfolio in equities & that too managed by professional experts, look for Monthly Income Plans.
Dividend Income earned on Monthly Income Plans are tax free in the hands of investor but the Dividend distribution tax is payable on MIP which is already adjusted in NAV itself, where as interest earned on Fixed Deposits is taxed. Now-a-days, banks are deducting TDS of 10-20% out of interest income earned in FD. So you had to again get into the stuff of Income Tax Refund.
Types of MIP
There are three types of Monthly Income Plan. Monthly Income Plans offered by
- Post Office
- Mutual Fund Houses
Monthly Income Plans do have an exit load if a investor withdraws his Investment within one year whereas Monthly Income Plan doesn’t attract any load for investors who want to invest for more than one year.
Finally, is it for you???
If your Age is above 45-50 & ready to take little more risk than debt instruments or Fixed Deposits or if you are a Retired professional, then Monthly Income Plan is the best suited product for you. A person who is nearing retirement can opt for Monthly Income Plan also. But if you have a young blood & your risk appetite is quite high, then you may opt for a balanced fund & choose Growth option or go in for an Equity Diversified Fund.
– This article has been provided by Mayank Gupta, founder at wealth management company WealthBazaar.
No dancing shoes ,after 65 years of age are recommended!!!!!Play the market, invest in shares/Company deposits/Mutual funds etc from 20-65 years of age; therafter, park it all in a 10% bank deposit and laugh your way to the bank !!!! i have actually seen gentlemen of 80 years distributing money; saying they dont know what to do with the excess.
avoid worry stess and enjoy the simple things of life. That alone will keep you healthy and stress free after 65.
Other views welcome.
I have sixty thousand in hand and want to create another source of income.
I have only source of income is monthly salary. i am thirty year old. I would like to invest in MIP to create another souce of income. what is your opnion on this?
If you are looking to invest in MIP, you may look to invest in HDFC MIP-LTP & you can expect 12% returns on a yearly basis, if invested for 3 year horizon. I hope I am able solve your query
Thanks for your response Mayank.
you are referring the growth option or divedend option?
what about reliance MIP?
Always always go for growth option in mutual funds or rather any investments. because the compunding takes place much effectively. I would also suggest you to invest in parts in equity & balanced mutual funds. Pankaj is a good financial planner also
the reason i prefer to invest in MIP is because, i need monthly income. otherwise i would prefer to invest in any diversified equity fund, which will give much better returns.
Then MIP IN HDFC MIP is a good option or also look at investing in FMPs
tats………vry good know for all of us………we all should be careful while doing this……..
I am 26 year old and my monthly salary is 36K.I want to know some good monthly income plan.
You can choose from Birla Sun Life MIP II Savings 5, HDFC MIP Long-term and Reliance MIP
HI I want to invest some amount around 5-10K monthly. Is SIP is good to invest ot MIP?
Please suggest some plans .. I am 30yr old and if monthly some amount comes as returns that will be good..
As age is on your side, if you don’t need the invested amount for atleast next 5-6 years, it will be wise to invest in other forms of mutual funds like equity or balanced.
Looking at your age being 30, you can look to invest in mutual funds through SIPs as monthly income plans doesnt take the advantage of power of compunding. You can expect 16-17% annualised returns from mutual funds if invested for more than 5 years. Also review your mutual funds every year
Hi, I have an SIP Reliance Growth & Birla Sunlife ELSS. Would like to increase my investment in MFs through SIP. Can you recomend some funds? I am 31 years ols & the mount of SIP currently it is 1K monthly in each.
Investment in mutual fund should be on the basis of your needs and appetite.
Please go through following pages and you will have some clarity:
Dear Sir, I have LIC with premium of R.4,60,000/year. and house hold expenses of Rs.25,000/month. I am looking for regular incom scheme which can take care of above. I am ready to make one time payment which can give returns of above amount. Pls suggest.
Please don’t put your hard earned money into LIC for investment purposes. Don’t invest into insurance policies.
If you need regular income, better to put into a mix of debt and equity based investments.
My dad is of 55 years of age and is looking for some plan where he can get monthly income after 3-5 years or so . How should he devide the money so that we reduce the risk as well as gain the maximum advantage. From what i read in your articles & others i find he can pool in 1.MIP 2.SWP 3.Post Office WIthdrawl 4. LIC or other pension plan 5. Bank But what should be the ratio one should invest into them (Note : Responsibilities one kid is yet to be setteled )
I would not advise to invest into any LIC/insurance plan at this age.
He should divide his money into Balanced mutual funds (bit riskier due to equity part, but should do good for five year term), Post office Monthly income scheme (PO-MIS), MIP mutual funds, Bank fixed deposits, Fixed maturity plans (FMP) mutual funds and liquid mutual funds.
As of now, if there is a fixed sum, then invest 50-50 into liquid mutual funds and bank fixed deposit/FMP MFs. From liquid mutual fund start a STP (systematic transfer plan) to balanced mutual fund for one-two years. So at the end of two years, most of the amount would be distributed among balanced mutual fund, FMPs and fixed deposits.
After five years, start SWP back from balanced mutual funds to bank account and invest into PO MIS and MIP mutual funds.
I am just the new follower of your valuable articles from Singapore.
Can you suggest few FMPs which can yield a better returns? What are the investing organisations (i.e. AMC/Bank/post office) providing this facility? Better give me any published article regards FMPs.
Also I need a article on STP and SWP plans. Since very difficult to find such articles.
Thanks in advance!
FMP (Fixed maturity plans) are close ended mutual funds, so you can invest in them through AMC or bank/online trading account.
You can read about SWP on this link: http://www.pankajbatra.com/finance/why-opt-for-systematic-withdrawl-plan-swp/
You may ask specific questions about STP/SWP/FMP here or on http://www.socialfinance.in, we would love to answer those.
I am paying a salary of Rs. 80/-thousand per month to my GM-Finance & Accts. A company has provided his vehicle for official purpose, but salary of driver is paid by him from his pocket of Rs. 10/-thousand per month, so i like to ask u a question whether i can show GM salary of Rs. 70/- thousand instead of 80/-thousand , so that he can save a income tax by making salary voucher for the driver every month for Rs. 10/-thousand. is there any other way i can reduce his total income so that his total income does not fall in 30% income slab.
As driver salary is paid by GM for a company owned car, Rs 900 per month would be non taxable for same.
Is Surcharge of 3% is applicable for every individual salary person. What is the percentage of surcharge applicable for year 2011-2012
Its not surcharge, but its education cess. 2% is for primary education and 1% for secondary and higher education.
Its applicable to all salaried persons and people with business/professional income too.
Kindly suggest me to get a fixed Monthly Income, I sold one of my property, now I am having 20-25 lack to Invest.
If you are looking for monthly income after 10 or more years, it would be better that you invest into equity mutual funds+PPF using monthly investments and later start taking out money from it when needed.
But if you need monthly income now, then debt monthly income mutual funds or post office MIS would be good options.
I am 31 year old and I can invest up to 15 K per month. I have a six month old daughter. Would you please let me know in which should I invest ? I m confuse about investment opportunity other than PPF. Would you please guide me.
Thanks & Regards
You need to invest for long term for daughter education and marriage.
For this long term you must invest into a mix of debt and equity based mutual funds. As you have time in your hand, equity should be more in portfolio as of now. As you approaches your goal, start decreasing investment in equity.
PPF and equity diversified mutual funds would be best for you.
Don’t invest lump-sum. Start SIPs in mutual funds. Currently market are on lower side, it would help you buy funds at lower cost. SIP averages out cost of buying, as in some months market may be higher and in some it may be lower.
I have one more question to ask.. would it advisable to invest as per current market ?
Thanks & Regards,