Moneycontrol
Sep 23, 2011 04:26 PM IST | Source: Moneycontrol.com

MIPs: Smart investment avenues for conservative investors

In recent years, monthly income plans (MIPs) of mutual funds have become quite popular with the investors for their safety and ability to yield returns higher than a bank FD due to its equity exposure.

MIPs: Smart investment avenues for conservative investors

By Shruti Jain, Arihant Capital Markets


In recent years, monthly income plans (MIPs) of mutual funds have become quite popular with the investors for their safety and ability to yield returns higher than a bank FD due to its equity exposure. While MIP is a smart investment avenue for conservative investors, as it aims at providing reasonable returns with limited risks, it is important for investors to not be misled by its name: Monthly Income Plan.


A MIP is a hybrid investment avenue offered by the mutual funds that invests a small portion of its portfolio, around 5-25%, in equity and the balance in debt and money market instruments. The equity component acts as a catalyst that helps the fund generate that extra return. MIPs provide regular income to investors, but the periodicity depends upon the option you choose. These are generally monthly, quarterly, half-yearly and annual options. A growth option is also available, where you do not receive regular dividends, but gain in the form of capital appreciation.


A MIP is best suited for investors with a conservative risk profile who want to take exposure in equity but want to contain the risk of downside. MIPs also appeal to investors in the higher tax bracket as these schemes offer better post-tax returns compared to other investment options such as fixed deposits.

MIPs offer flexibility to invest across asset classes and hence can offer great value to an investor

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