“If you’re looking at saving for a rainy day”, “If you hope to have a steady stream of income when you retire” then, “Monthly Income Plan might be just the ticket”!
An Introduction: In current market scenario, when Fixed Income alternatives are reducing because of limited options available in terms of low returns and unfavorable taxations, Monthly Income Plan (MIP) comes out be the suitable solution for the clients with conservative to moderate risk appetite. MIPs are the hybrid investment avenues that invest a small portion of their portfolio (around 15 %-25 %) in equities and the remaining in debt and money market instruments (i.e. bonds, certificates etc). MIPs can provide regular inflows to investor, but the periodicity depends upon the option you choose. These are generally monthly, quarterly, half-yearly and annual options. A growth option is also available, where you do not receive regular dividends, but gains in the form of capital appreciation. However, like any other fund, the returns are market-driven from the equity component of the portfolio. Though many fund houses strive to declare a monthly dividend, they have no such obligation.
With the current levels of market volatility, MIPs can be a good option considering their exposure to debt instruments. These will help you maintain a low-risk portfolio and generate relative regular and stable returns. Stability, rather than quick and high returns, should be the priority for a typical MIP investor. MIPs differ from Income funds, which are launched with the objective of posting regular returns (either in the form of dividends or capital appreciation) only from debt securities.
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