What are Mutual Fund Monthly Income Plans


These funds can generate a regular income for their investors

The hybrid nature of the monthly income plans makes it a low-risk investment plan

If you are looking for a steady income, then invest your money in monthly income plans (MIP). These schemes from mutual funds invest most of its corpus in debt instruments. Since these funds invest in a mix of funds, these are categorized under hybrid funds. The most important feature of monthly income plans is that it has a monthly payout. It helps investors to get a periodic income. Let us know more about monthly income plans in this post.

Monthly income plans

Monthly invest plans are a good suggestion for those who look for a traditional way of investment method. It can generate a regular income for their investors with relatively low-risks. These are a type of mutual fund plans that mainly invest in both debt and money market instruments. In fact, approximately 80% of its portfolio consists of debt market instruments. And the remaining part invests in equities to give this fund the characteristics of a hybrid fund.

You can receive income by investing in this fund based on the availability of the excess distributable income. An investor in MIP receives income in the form of dividends. However, if there is no surplus amount for distribution, investors will not get any dividend. Even if these mutual fund plans might suggest guaranteed returns to a new investor, these are also subject to market risks. So returns from these funds are not guaranteed.

Best choices for monthly income plans

Classified under hybrid funds, monthly income plans also to invest in listed or unlisted equities, but the major portion of its portfolio constitutes debt instruments. The hybrid nature of the monthly income plans makes it a low-risk investment plan with potentially high returns. As an investor, you can choose a growth option or dividend option to invest your money in monthly investment plans.

Growth option: If your main aim of the investment is capital appreciation instead of regular income in the form of dividends, growth option is the best suggestion. The fund manager reinvests any profits generated in order to grow the portfolio of the investor. It helps to increase the AUM and the unit NAV of the fund. As an investor, you can enjoy the benefit of the growth option of MIPs at the time of redemption.

Dividend option: Monthly income plans have the potential to distribute excess income generated to investors similar to shares. Investors can get regular income in the form of monthly, bi-monthly, quarterly, or annual payout if they choose the dividend option. However, no payout is guaranteed in this scheme. In this case, an investor gets dividends on a per unit basis, and at the same time, the NAV of each unit gets decreased for the equivalent amount.

Features of monthly income plans

Exposure to both the debt and equity market is a prime feature of monthly income plans. The investment in debt markets is subject to fluctuations in interest rate, whereas investments in equity are susceptible to the volatility of the share markets. Exit loads apply to these funds @1% at the time of redemption if it redeems before the completion of one year. Even if the name implies monthly income plans, these schemes do not guarantee regular income or dividends.

Invest in monthly income plans if you are looking for a steady monthly income. In this fund, the money invests in debt/money market instruments to generate income for its investors. These schemes are subject to market risks and do not guarantee returns. But if you check the historical record of these schemes, you can find that these funds provide relatively higher returns than fixed deposits. So, if you are looking for a conservative way of investment, you can choose monthly income plans as it can be a low-risk option for investors.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh