Earning regular monthly income is prime need of every individual today. In order to generate regular monthly income, we generally do a job. However, there are many businessman or investors who generate regular monthly income by making investments.
If you are a businessman with irregular income and want to invest money for regular monthly income you can go through 10 Best Investment options to generate regular monthly income. In this post, I will discuss MIP – Monthly Income Plans and also suggest some of the best MIP for the investment.
What is MIP – Monthly Income Plans?
MIP is a debt mutual fund scheme that invests its 70-75% funds in government bonds or other fixed income generating schemes. MIP offers regular monthly income in addition to dividend payout. However, income generated from MIP is variable in nature. MIP comes with two options.
MIP with Dividend Option –
As the name indicates MIP with dividend option provides you regular dividend income. You can receive this dividend monthly, quarterly, half-yearly or half yearly based on the option selected by you at the time of buying MIP.
MIP with Growth Option –
In this option dividend is not paid to the investor it will be reinvested for the growth of fund hence the overall growth of fund will be high. The benefit of this growth will be paid to the investor at the time of redeeming funds.
Types of Monthly Income Plan – There two types of monthly income plans available in the market.
- Aggressive MIP Funds – This types of fund invest 15-30% of fund amount in the equity market.
- Conservative MIP Funds – This type of fund invest 0-15% of fund amount in the equity market.
Features of Monthly Income Plans (MIP)
Unfixed Monthly Returns – MIP provides very good returns to the investor. However, returns from MIP is not fixed. The returns generated by MIP is based on the performance of the fund. If fund performance is good the return generated by the fund is high, whereas if fund performance is poor MIP may end up giving bad returns.
MIP returns depend on Interest rates – The returns generated by MIP is based on market condition and prevailing interest rates. As a majority of investment done by MIP is in debt component any change in interest rate by the government directly impacts the performance of MIP.
Tax Treatment – Tax treatment to monthly income plans depends upon time when you exit from this scheme. Taxes applicable on MIP are divided in short term capital gain tax and long term capital gain tax.
- Short term capital gain tax – If you sell your mutual fund within 1 year from the date of purchase short term capital gain as per applicable tax slab is applicable.
- Long term capital gain tax – If you sell your mutual fund after 1 year from the date of purchase long-term capital gain tax is applicable which is 10% to 20% of indexation whichever is lower.
- Dividend – No tax is applicable on the Dividend paid by the MIP mutual funds.
Comparison of MIP with Other Fixed return options
A comparison of MIP with other fixed return options is given below for your better understanding.
Best MIP – Monthly Income Plans – Aggressive & Conservative Funds
Below are best Monthly Income Plans (MIP) in the aggressive and conservative category.
When to Invest in MIP? – Practical Purpose/Examples
Well, as per discussion above you must have understood the benefits of Monthly Income plans (MIP’s). MIP is a boon for the investor who wants to generate regular income for meeting some fixed expenses. Let’s take a look at practical examples of the same.
Top 10 Best Mutual Funds SIP to invest in India for long term
Pocket Money for children – Giving fixed pocket money to children is a regular expense. One option of fulfilling is expense is directly paying money from your income. However, if you are a smart investor you can invest in monthly income plan to generate regular monthly income for paying pocket money to your children. By adopting this way you can easily keep track of child expenses.
Yearly Vacation – Taking a break and enjoying a yearly vacation is sometimes necessary. You can plan your yearly vacation without hampering your regular budget by making an investment in right monthly income plans.
Regular Monthly income after retirement – If you are retired person you can generate monthly income by investing your money in monthly income plans. As per me, MIP is better option compare to MIS and fixed deposit. You can enjoy financially free retired life by investing in MIP’s.
MIP is one of the best investment options that helps you in generating regular income and fulfilling your regular expenses. If you are planning to invest your money in fixed deposit I advise you to look at Monthly Income Plans before taking any investment decision.