|
Monthly income plans, or MIPs, as
they are more popularly known, are a category of mutual funds that
invest mainly in debt instruments. Only about 10-20% of the assets
are allocated to equity stocks. But the very name – monthly
income plan – is a misnomer, as these funds do not guarantee a
monthly income. Like any other fund, the returns are
market-driven. Though many fund houses strive to declare a monthly
dividend, they have no such obligation.
MIPs are launched with the
objective of giving a monthly income to investors, but the
periodicity depends upon the option chosen by the investor. These
are generally monthly, quarterly, half-yearly and annual options.
A growth option is also available, where the investors do not
receive regular dividends, but gains in the form of capital
appreciation.
Suitability
MIPs are suitable for
conservative investors who want to earn marginally better returns
than a debt-only portfolio. Conservative investors generally
remain invested in fixed income instruments, but sometimes they
need returns that are above the inflation by a few points.
Obviously, equity exposure is the best way to provide this
meaningful return over the inflation. A MIP typically invests bulk
of its assets in debt, while a small equity exposure is maintained
to earn something extra.
The
Way Ahead
The market is close to its all-time high of May 2006 after
which it witnessed a sharp correction.
It is likely to remain volatile and could also witness some profit-booking. Investors need
to re-look and re-balance their investment portfolios. At these
times, investors
should reconcile with the fact that days for making easy money
without compromising stability are over. MIPs can be a good option
considering their exposure to debt instruments. These will help
investors to maintain a low-risk portfolio and generate regular
and stable returns. Stability, rather than flashy returns should
be the priority for a typical MIP investor. And the MIPs, which
have shun aggression,
cut equity exposure and stick to quality large-caps, are likely to
achieve that objective.
The performance of some MIPs with
their exposure to equity in presented in the table below. The
schemes cannot be compared only on the basis of their returns as
each have a different level of equity in their portfolio.
Investors need to choose a scheme with a level of equity they are
comfortable with and balances their individual portfolios.
|
Scheme
|
NAV
|
Fund
Size
|
Equity
exposure
|
Returns % (Absolute)
|
|
(
04-Oct-06
)
|
(Rs
Cr.)
|
(%
of Net Assets)
|
No.
of Scrips
|
1 Mts
|
3 Mts
|
6 Mts
|
1 Year
|
|
Birla MIP II - Savings 5 Plan
|
11.33
|
0.72
|
3.50
|
6
|
0.99
|
2.52
|
3.47
|
5.81
|
|
FT India Monthly Income Plan
|
19.97
|
64.7
|
19.59
|
28
|
1.14
|
5.09
|
3.09
|
7.74
|
|
HDFC Monthly Income Plan - STP
|
12.58
|
38.54
|
13.97
|
19
|
0.21
|
2.75
|
0.59
|
4.93
|
|
HSBC MIP - Regular
|
11.92
|
5.61
|
13.61
|
15
|
0.52
|
3.12
|
3.42
|
7.07
|
|
ING Vysya MIP Fund - Plan B
|
11.73
|
0.62
|
12.98
|
25
|
1.19
|
3.92
|
0.44
|
6.22
|
|
Kotak Income Plus
|
12.71
|
11.75
|
11.92
|
29
|
0.59
|
1.77
|
1
|
7.64
|
|
Prudential ICICI MIP Plan
|
18.3
|
55.08
|
14.35
|
28
|
0.97
|
3.58
|
2.99
|
10.29
|
|
Reliance Monthly Income Plan
|
13.31
|
39.25
|
18.82
|
8
|
0.93
|
5.43
|
4.45
|
12.31
|
|
SBI Magnum Monthly Income Plan
|
16.37
|
14.18
|
11.46
|
21
|
0.47
|
2.87
|
2.93
|
7.51
|
|
Sundaram BNP Paribas Monthly Income Plan
|
12.42
|
5.23
|
14.28
|
19
|
0.42
|
2.51
|
0.49
|
6.99
|
Source: ICICIdirect Research |
