In India people do not prefer Monthly Income Plan for Investment neither the plan is very popular. Well one thing that I want to share with you is that monthly income plan is the best alternative for fixed deposits. It is often seen that the investors get confused between the monthly income plan and monthly income scheme. Investors feel that both the investment options are identical but this is not the case.
Basic difference between Monthly Income Scheme and Monthly Income Plan for Investment:
|S.No||Monthly Income Plan for Investment||Monthly Income Scheme for Investment|
|1.||It is a debt oriented mutual fund investment schemes.||It is a post office investment schemes.|
|2.||MIP offers you varied monthly income as the money is invested in equity and debt at an ratio of 20:80 respectively.||MIS offers fixed monthly income at a interest rate of 8.5% annually|
|3.||It doesn’t guarantees monthly income.||It is offers you fixed monthly income.|
|4.||It offers return of 14%* annually.||It offers return of 8.5% annually.|
|5.||The investor will have to pay 1% exit load if he/she withdraw money before 1 year.||Lock in period is 1 year but if investor withdraw money before it then he/she will have to pay 1 to 2% penalty.|
|6.||TDS is not applicable here.||TDS is not applicable but tax is charged on the interest earned.|
|7.||No limit on investment amount.||For single account limit is of 4.5 lakhs while for joint account limit is 9 lakhs.|
|8.||Ideal for risk averse investors.||Ideal for investors who cannot afford risk.|
What is Monthly Income Plan?
Monthly Income Plan is one of the debt oriented form of investment. It is a form of mutual funds which offers you monthly income in the form of the dividend payout. In monthly income plan for investment 80% of the money is invest in debt instruments like government securities, corporate bonds etc. While the rest 20% is invested in equity market.
The monthly income plan (MIP) is offered in two different variants are:
- Aggressive MIP Mutual Funds
- Conservative MIP Mutual Funds
1. Aggressive MIP Mutual Funds
It is type of MIP mutual fund in which 70% of the fund is invested in debt instrument. While remaining 30% is invested in equity. Such type of MIP offers high returns at high risk.
2. Conservative MIP Mutual Funds
In such type of MIP mutual fund 80% of fund is invested in debt instruments. However 20% is invested in equity. Such type of MIP is ideal for low risk takers. The returns offered by conservative MIP is lower than aggressive MIP.
Options for Monthly Income Plan Investors:
- MIP with Dividend Option
- MIP with Growth Option
1. MIP with Dividend Option
Such an option provide regular monthly income to its investors in the form of dividend. While investing money the investor needs to choose the dividend payout frequency like monthly, quarterly or yearly. It is an ideal form of those who are looking for monthly income plan for investment.
2. MIP with Growth Option
Such type of option offers its investor a chance for capital appreciation. So if you will select the growth option then you income will grow. You can even take benefit of the capital appreciation at the time of redeem these funds.