Do I need Monthly Income Plan?

It is very important to study the different avenues you wish to invest into. A guide to what Monthly Income Plans are and who should opt for these plans.

Your friends might call you miser for holding back your spending. The good news is that you should be proud of having control over your money and savings coming easily to you. There are however many avenues that market provides one to park their money than just keep them saving with no real wealth being built.

 Let us venture into the monthly income plan (MIP) and a guide who should really undertake it.

Investors looking for Regular Income

If you are looking for a regular income during your phase of retirement/ semi-retirement, MIPs act as real good option. Or simply looking to generating some regular income, however it is more advisable to go for a quarterly or half-yearly plan then for a monthly option.

Conservative Investors looking for Better Returns

Is risk not your game when searching for an investment option? If you are one of that conservative investor yet in search of some good returns other than strictly debt options like insurance policies or fixed deposits. Then MIPs work as a great option for you. However it is important to note that MIPs aren’t 100% safe but are surely a good change from your routine FD returns.

Investors who want to park a big sum of money

This is probably a major query a lot of investors possess, that of parking their lump sum money with low risk involved. If you wish to park the money for a tenure of 2-3 years with low risk than MIPs are a real good option, however it isn’t advisable if your horizon is less than 6 months. Growth options with MIPs can be a suitable instrument.

Now let us look into the two ways of getting income from an MIP. One is however the regular way of choosing dividend and another option is starting Systematic Withdrawal Plan from MIP after a span of a year of buying them. Let us study in detail the good and not so good attributes about both the options

Choose Dividend Option

The investor immediately starts receiving the income as soon as the company starts declaring the dividends with the taxation issues taken care of. However it comes with a bad side to it, 14% dividend distribution tax would be paid by company and the income stability will quite depend on how often the company declares the dividends. As you may not receive any income for that particular period if they decide to skip the dividend.

Choosing growth option and start Systematic Withdrawal Plan (SWP)

This method can help you make some stable and more tax efficient income with some strategy in place. In MIP you can make a choice of growth option and in the course of a year you can start a systematic withdrawal plan (SWP) as oppose to SIP

Hopefully this helps you enlighten your queries on MIP and make you believe in it as one alternative to park your savings.