Monthly Income Plans (MIPs) intend to offer income on a regular i.e. monthly basis to investors. However the monthly income is not assured, the same depends on the fund's performance, which in turn is a factor of the markets. Generally, MIPs invest around 75-95 per cent of their corpus in debt instruments and the balance is held in equities. It is this equity component which gives it an edge over the conventional debt products as higher returns can be generated on the same. The equity component is typically the defining factor for MIPs in terms of the returns it generates. Needles to say, higher the equity component, higher is the risk an MIP would entail.
Investment options are available in dividend and growth plans and dividend payouts maybe of different time intervals. Options can be selected based on the risk appetite and the quantum of liquidity required at regular intervals.
These schemes are optimal for those looking at regular returns. Alternately investors with some risk appetite who want returns which are superior to a regular bond fund but do not have the stomach for equity instruments, can consider a small exposure to this variant of Mutual funds.
Analysis of some of the Schemes which appear to be satisfactory bets for a 12-18 month investment are:
| Particulars | 1 year (%) | 3 year (%) | 5 year (%) | | Birla Sun Life – Monthly Income | 13.8 | 35 | 64.2 | | HDFC MIP – Short Term Plan | 15.7 | 25.28 | 46.99 | | HSBC MIP – Savings | 20.56 | 39.56 | 75.9 |
As on 28th April, 2010
HSBC MIP – Savings Plan
Recommended for High Risk Investors
Equity Exposure of upto 21% - not many index stocks and hence high risk , high return proposition
Remaining invested in Corporate and PSU debt instruments, money market instruments, securitized debt and Bank CDs of higher ratings. The Average Debt Portfolio Maturity stands at 15.16 months.
A consistent performer over the last few years.
Birla Sunlife Monthly Income
Recommended for Medium Risk Investors
Equity Exposure of over 15 % with a mix of front liners and mid cap stocks.
Remaining invested in corporate and PSU debt instruments and money market instruments of high quality with lower Average Maturity pf 1.24 years
Of the total debt component 11% is in G-Sec.
Can be specifically considered by those looking at dividend option
HDFC MIP – Short term Plan
Recommended for Low Risk Investors
Equity Exposure of Upto 11% in fundamentally sound companies most of which are front liners.
Remaining invested in debt and money market instruments of high quality.
Thus far, its Long Term Plan has been an out-performer but with lower Average Maturity of 1.67 years now, the Short Term Plan augurs well in the rising interest rate scenario
Credit exposure is conservative in sound PSU entities, Banks & Corporates
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