MF-MIP(Mutual FundsMonthly Income Plan)

- Dhaval Shah - Ishan Kalele - Piyush Churiwalla

13230 13075 13099

Introduction

An MIP is nothing, but a debt oriented mutual fund which gives you income, in the form of dividends simple as that. As MIPs are debt oriented mutual funds, they invest heavily in debt instruments like debentures , corporate bonds, government securities etc. It generally has 75-80% of its money in debt and rest in equity and cash . The income you can get from Monthly income plans is not limited to the monthly option. You can also choose to receive income quarterly, half-yearly or annually.

How to Invest?

SELECT THE COMPANY WHERE YOU WANT TO OPEN YOUR DEMAT ACCOUNT. FILL THE KYC FORM. DEPOSIT THE CHEQUE. OPEN A DEMAT ACCOUNT INVEST IN THE DESIRED MIP SCHEME.

Investment Tenure(Time period)

MIPs are ideal for investment horizon of 2-3 years.

Benefits & Drawbacks

Dividends can be declared only from the profits and not from Capital. No guarantee of Regular Income MIPs return are influenced by interest rates and stock market MIPs are prone to mis-selling because of a high commission structure

Taxation
Short Term Capital Gains : Any profit before a year would be Short term capital gains and it would be added to your income and taxed at your slab rate. Long Term Capital Gains : Any profit you get after 1 yr in MIP would be taxed at 10 per cent. Short Term and Long term Capital Loss : The best thing about MIPs over FDs or Post office schemes is that incase you have any loss in MIPs , you can set it off against the capital gains in the same year or in next 8 yrs. Dividends : All the dividends received from the MIPs would be tax-free in hands of investors, but note that companies already pay Dividend distribution tax from the MIPs

Min and Max investments Limits

Minimum Investments:- 5000rs Maximum Investments:- No limit

Withdrawal:-If premature ,then penalty

On pre-matured withdrawal of your deposits, interest will be calculated at 1% below the rate applicable for the period of deposits. Penalty for pre-closure: 2% pre-closure charges would get deducted if we close the scheme before 3 years and 1% after 3 years but before 5 years period. Regarding MIP, if you exit before 1 year there is exit load of 1%. If you want to exit after 1 year, there is no exit load.

Who should Invest in MIPs ?

Investors looking for regular Income Conservative investors looking for better returns Investors who want to park a big sum of money

Comparison with nearest product

TWO WAYS OF GETTING INCOME FROM MIP

MIP with Dividend option : Monthly income plans with dividend option provides you an income in form of dividends. There is an option to receive this income monthly, quarterly, half-yearly and yearly. So you have to choose the option at the time of buying the MIP.

MIP with Growth Option : Here, the money is not paid out to you in forms of dividends, instead it keeps growing in the mutual funds. Hence your money is just growing inside the fund itself and you can reap all the benefits at the time of redeeming the funds in future. In this option, you have nothing to do with dividends.

Risk and Historical Returns

MIPs are affected by interest rate changes in the economy (due to majority investment in debt instruments) as explained below: When interest rates (in the economy) fall: NAV of MIPs rises (due to increase in bond prices); When interest rates rise (as in the current scenario): NAV of MIPs fall; this is when MIPs look to the equity portion in the portfolio to sustain returns. MIPs aim to provide steady returns with limited volatility. In the past 3 years, most MIPs have provided average returns in the