What Is Mutual Fund Monthly Income Plan? Should You Invest

When you think of a Mutual fund, you think of the risk associated with it. A monthly income plan (MIP) changes this perception. However, in MIP, the risk is still there, but, the investor benefited from the convenience of liquidity while also receiving regular dividend payments. However, as the name indicates, MIPs do not provide a consistent and predictable monthly income.

What is MIP?

MIP is a sort of mutual fund strategy that primarily invests in debt and equity assets with the goal of generating cash flows while also protecting capital. MIPs are debt-oriented hybrid mutual funds. It is a moderate-risk plan. Dividends are paid out on earnings, just like any other market-linked investment instrument. A MIP is designed to generate a consistent source of income in the form of dividends and interest. As a result, it's usually appealing to retirees or older folks who don't have any other significant monthly income streams.

Benefits of MIP

• In terms of returns, it outperforms other similar saving programs and fixed deposits.
• There are no investment limits for monthly income programs.
• There are no entrance load or processing fees to pay.
• The exit load must not exceed 1%.
• A high level of liquidity

Should you add MIP to your investment portfolio?

Investments are ideally good for future earning and making your savings safe from depreciation. The same goes for MIPs, it is great for investors/individuals who want to invest in the stock market but don't want to risk a lot of money. Or they lack stock market deep knowledge MIPs are for people who want to put their money in a safe place and obtain a steady paycheck. If you have a significant amount of discretionary income, putting it in savings schemes or monthly income programs that give consistent monthly payments is a terrific choice. And if you are a first-time mutual fund investor, MIP can be an ideal investment plan for you. This assures that your unused funds begin to produce dividends or earnings.

Taxing in MIPs in India

MIPs are taxed in accordance with debt fund regulations. Short-term profits from MIP are added to the investor's annual income and taxed at his tax slab rate, but long-term capital gains are taxed at a rate of 20% with indexation and 10% without indexation. Investors can avoid taxes by investing for the long term and starting an SWP (Systematic Withdrawal Plan) after at least one year.