This video will discuss about monthly income plans (MIP) offered by mutual funds
MIPs are debt-oriented hybrid mutual funds
This MIPs invest in debt and equity
The portion of debt is around 75-80%
The remaining 15-25% and sometimes, 15-30% can be invested in equities
MIP has the feature of a debt fund and its taxation is that of a debt fund
It is called monthly income plan since the fund house declares periodic dividends. Generally, they declare monthly dividends but they are bound to declare them
Dividends could be monthly, quarterly or half-yearly
Remember, dividends will only be declared when there are profits made by the fund
There could be a quarter where there may not be any dividend
Regular dividends generate regular income for the investor
Investor can also apply for a systematic withdrawal plan (SWP) simultaneously in a MIP plan
This ensures that whatever income declared is additional income from the fund
The money can be transferred to a savings account or to another fund
MIPs are usedul for retired individuals with retirement savings, people who want a regular income, people in mid-career stage or those who have taken voluntary retirement
It could also provide regular income for home makers from their accumulated savings
Because of the equity investments of an MIP, the income may not be regular since dividends are not constant
Periodicity of dividends is not constant and the amount may not be constant
Investors who are prepared for the risk of such volatility can opt for an MIP