There are days when you feel the comfort of knowing your money is guaranteed safety in a fixed deposit, and then there are days when you think of ways that you could possibly improve your money’s performance than what it already is. If you’re looking for something that can provide you with better performance than a fixed deposit at a low risk, then you might want to turn your attention towards monthly income plans. Read on to know more about them.
2. There are days when you feel the comfort of
knowing your money is guaranteed safety in a
fixed deposit, and then there are days when you
think of ways that you could possibly improve
your money’s performance than what it already is.
If you’re looking for something that can provide
you with better performance than a fixed deposit
at a low risk, then you might want to turn your
attention towards monthly income plans.
3. A fixed deposit (FD) is a financial
instrument provided by Indian banks which
provides investors with a higher rate
of interest than a regular savings account,
until the given maturity date.
They are considered to be very safe
investments.Term deposits in India is used to
denote a larger class of investments with
varying levels of liquidity.
4. An Monthly Income Plan (MIP) is nothing, but a debt
oriented mutual fund which gives you income, in the
form of dividends – simple as that.
As MIPs are debt oriented mutual funds, they invest
heavily in debt instruments like debentures ,
corporate bonds, government securities etc.
It generally has 75-80% of its money in debt and rest
in equity and cash .
The income you can get from Monthly income plans is
not limited to the monthly option.You can also
choose to receive income quarterly, half-yearly or
annually.
5. Fixed deposits are all very well so long as you’re
not looking to make too much out of your
money.
But when you’re hoping to make the most of
what little you do have, you need to look out for
better performance at similarly low risk levels.
Enter, monthly income plans.
These are rather good alternatives to your dull
and drab fixed deposits.These are basically debt
instruments, which renders them a great deal
safer than the volatile nightmare that is equity.
6. Monthly Income plans come in both dividend
as well as growth options.
If you were to go for the dividend option, you
would get regular income from the amount
that you’ve invested – as per the dividend
declaration the fund makes.
On the other hand, by choosing the growth
option, you allow your money to grow
without disturbing it.
7. If you should choose the dividend option, keep in mind
that you will received them only as they are declared – on
the profit and not on the capital itself.
This is intended to ensure that the company doesn’t show
itself to be giving out incomes that they actually don’t do.
Even if they’re a debt instrument, fluctuating interest
rates are likely to influence the scheme.
At such points, the equity side of the deal comes in to play,
ensuring some amount of profit to offset the volatility.
Companies tend to pay out the dividend distribution tax
before handing you the dividend.
8. Here, the money is not paid out to you in forms of
dividends, instead it keeps growing in the mutual
funds.
Hence your money is just growing inside the fund
itself and you can reap all the benefits at the time
of redeeming the funds in future.
In this option, you have nothing to do with dividends.
Note that you get power of compounding in growth
option because your returns also earn in future.
Here is an article on difference between dividend vs
growth option in mutual funds to give you a better
idea of what I am talking about.
9. If you’ve got a large chunk of cash lying about
uselessly, then the monthly income scheme
is a good plan to invest it in.
You also have the option of choosing to have
your dividend come in every month, quarter,
bi-annually or annually.
10. Thank You
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