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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.

Unit Linked Insurance Plans

ULIPs, or Unit Linked Insurance Plans, are insurance policies that combine the advantages of saving and protection into a single instrument. it also educates you on the different investment options available in liquid assets, fixed income instruments, and equities. There is a death benefit in a ULIP, which is the amount paid to the nominee if the policyholder dies during the policy period. If the policyholder lives to the end of the ULIP’s term, he or she will get a maturity benefit.

Best Top-Ranked ULIPS To Invest In 2021 For Building Wealth

The CRISIL Unit Linked Insurance Plans (ULIP) rankings are based on two factors: cost and portfolio performance, which incorporate the two main characteristics of ULIPs: life protection and investment. The plans listed below are wealth plus type 1 online regular plans with ten-year tenure.

Why Should You Buy A Unit Linked Insurance Plan (ULIP)?

Future Goals

Savings are essential for achieving future goals such as purchasing a new home, funding a child’s education, and budgeting for retirement. It’s difficult to strike a balance between immediate necessities and long-term ambitions without long-term savings plans. ULIPs help you save in a systematic manner and plan for your future goals.

Investing options

You can choose from a variety of fund options and pick the one that best matches your risk tolerance. If you have a high-risk tolerance, you can choose to invest in equity. If you want to take a less risky approach, you can invest in debt or a hybrid fund.

Family’s Protection

A ULIP is a life insurance and investment plan that provides the policyholder with life insurance. In the event of the policyholder’s untimely death, his or her dependent family will be financially secure.

Provides Tax Benefit

Section 80C allows for a tax deduction on all premiums. Section 10(10D) of the Income Tax Act of 1961 exempts the maturity amount received, subject to certain conditions.

ULIP: Must know charges before opting

Though the charge structures of ULIPs offered by different insurance providers fluctuate, the following are some of the most regularly applied charges:

Charge for Premium Allocation

Before allocating the units under the insurance, a percentage of the premium is allocated to charges. Aside from commission, expenses, this payment usually covers starting and renewal expenses.

Charges of Mortality

These are levied to cover the cost of the plan’s insurance coverage. The cost of mortality is determined by a number of factors, including age, the amount of coverage, and the status of one’s health.

Fees for Fund Management

These are management fees that are deducted from the Net Asset Value (NAV) before it is calculated.

ULIP: Must know charges before opting

Charges for policy and administration

These are the fees for plan administration that are assessed when units are cancelled. This could remain constant during the policy’s life or fluctuate at a set rate.

Surrender Charges

Wherever appropriate, a surrender charge may be deducted for premature partial or full encashment of units, as specified in the policy circumstances.

Fee for Changing Funds

In most cases, a limited number of fund swaps are permitted without charge each year, with subsequent moves incurring a fee.

Deductions for service taxes

The applicable service tax is withheld from the risk component of the premium prior to unit allotment.

Investors should be aware that the percentage of the premium remaining after all expenses and the risk cover premium is used to purchase units.

Disclaimer

Market risk affects the Net Asset Values of unit-linked insurance policies, and the consumer is responsible for his or her decision. The quality of a company, a product, or a fund option is not determined by the name of the company, product, or fund option. Returns on funds are not guaranteed or secured.