Month: June 2021

Who should invest in MIP Mutual Funds?

Monthly Income Plans (MIPs) are recommended by investment professionals for retirees and ultra-conservative investors who want to invest a modest portion of their portfolio in stocks. MIPs put the majority of their money into debt and only 15-32% in stocks. The optimal debt-to-equity ratio is a portfolio manager’s art, and it enables retirees and traditional investors to make attractive returns on their investments (ROI) and maintain a consistent income. These types of savings strategies are designed to meet unexpected or urgent expenses. However, retirees should keep in mind that, despite their name, monthly income plans do not provide monthly income.

Types of Monthly Income Plans

Investors are given the option of reinvesting or redeeming their shares. If you reinvest, you’ll be able to get more fund units at the current Net Asset Value (NAV). When the investor finally redeems the stock, the capital gains are inflated as a result of this method.

Growth Option

When the fund administrators operate in this way, the income earned is reinvested in the funds, inflating the Assets Under Management (AUM). Investors are paid the accrued amount in a lump payment upon maturity.

Dividend Option

These plans are similar to share capital in that they pay out dividends on earnings regularly. Dividends are given out of a distributable surplus regularly, bi-annually, or annually.

Baroda Pioneer Conservative Hybrid Fund

The Scheme’s principal goal is to provide consistent income by investing in debt and money market instruments, as well as long-term capital appreciation by investing in equity and equity-related products. The fund has a 21.8 percent stake in Indian stocks, with 8.3 percent in large-cap, 5.45 percent in mid-cap, and 4.32 percent in small-cap stocks. The fund has a debt investment of 63.72 percent, with 61 percent in government securities and 2.72 percent in funds with very low-risk securities.

The one-year absolute return is 9.86% and three years annualized return is 10.05%. The NAV is as of 24th June 2021 is Rs 29.54.

ICICI Prudential Regular Savings Fund – Growth

Indian stocks account for 16.35 percent of the fund’s holdings, with large-cap stocks accounting for 11.46 percent, mid-cap stocks for 1.65 percent, and small-cap stocks accounting for 1.13 percent. 70.4 percent of the fund’s assets are in debt, with 16.55 percent in government securities and 46.57 percent in funds that invest in very low-risk securities.

The one-year absolute return is 15.11 and three years annualized return is 9.38% The NAV is as of 24th June 2021 is Rs 52.41

Aditya Birla Sun Life Regular Savings Fund

The fund has a debt investment of 96.57 percent, with 23.28 percent in government securities and 71.92 percent in very low-risk securities. Ideal for investors searching for a short-term investment option other than bank accounts or deposits.

The three-year annualized return is 7.21 percent, with a one-year absolute return of 23.28 percent. The NAV is as of 24th June 2021 is Rs 426.

DSP BlackRock Regular Savings Fund

The scheme’s principal investment goal is to earn income from a portfolio that is primarily comprised of high-quality debt securities while maintaining a reasonable risk profile. The Scheme will also try to produce capital appreciation by investing a lesser amount of its assets in Indian issuers’ equity and equity-related instruments.

The three-year annualized return is 5.71 percent, with a one-year absolute return of 15.64 percent. The NAV is as of 24th June 2021 is Rs 42. 65.

SBI Debt Hybrid Fund

It is a debt-oriented hybrid scheme that invests largely in debt and money market instruments to provide investors with a fixed income stream. It also invests in equity securities to boost the portfolio’s total results. The equity exposure, on the other hand, is limited at 25%.

The three-year annualized return is 9.60 percent, with a one-year absolute return of 20.57 percent. The NAV is as of 24th June 2021 is Rs 49.87

What are the Tax Implications of MIPs?

MIPs are taxable because they are debt-oriented funds. MIPs are subject to all short-term capital gains (STCG) and long-term capital gains (LTCG) tax legislation.

These funds may be of interest to those in higher tax brackets. In comparison to other traditional havens, they may be able to save money on taxes. Those in a lower tax bracket may prefer the growth option over the dividend option in order to earn larger returns and lessen their tax liability.

Disclaimer

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates.