Having a stable source of income is very helpful to reduce financial stress and meet goals to a certain extent. While many people are completely dependent upon saving or fixed deposits, there are many investment option available to provide regular payouts. These are all known as monthly income plans. These are aimed at balancing your income with growth, making your financial stress a little less.
Understanding how these plans work and whether they align with your strategy for long-term stability.
What are monthly income plans?
A Monthly Income Plan is a type of mutual fund, specifically a hybrid mutual fund that focuses mainly on debt investments, with a smaller part allocated to equity. The aim is to provide a regular income while maintaining a moderate overall risk. Unlike the name suggests, MIPs do not guarantee a fixed monthly payout. Instead, the income depends on the performance of the fund and how profits are distributed. For investors, this makes MIPs a balance between safety and growth, offering more stability than pure equity funds while still allowing some exposure to market-linked returns.
Who Should Invest in Monthly Income Plans?
Monthly Income Plans are best suited for individuals seeking a steady income with a moderate level of risk. Retirees, homemakers, and those nearing retirement often choose MIPs because they prefer safety over high returns. These plans can also work well for first-time mutual fund investors who want to start with a lower-risk option before moving into equity-heavy funds. Anyone looking to balance regular income with some potential for growth without taking on too much market risk can consider MIPs as part of their financial planning.
Key Features of Monthly Income Plans
Monthly Income Plans combine stability with some growth potential. Here are the main features:
- Balanced allocation – A large part of the fund goes into debt instruments, while a smaller share is invested in equity.
- Moderate risk – Lower risk than pure equity funds, but slightly higher than fixed deposits or pure debt funds.
- Liquidity – Investors can redeem units anytime, though an exit load may apply.
- No fixed payout – Despite the name, payouts are not guaranteed. Dividends depend on the fund’s performance.
- Flexibility – No upper limit on how much you can invest, making it suitable for both small and large investors.
How do monthly income plans work?
- Most of the money is invested in debt instruments, such as bonds and debentures.
- These debt investments earn interest, which can be distributed as dividends.
- A smaller portion is invested in equities for growth opportunities.
- Returns are not fixed; they depend on market performance.
- Investors can choose to receive dividends regularly or reinvest them.
- Fund managers actively decide where to invest, and their expertise affects results.
- The mix of debt and equity creates a balance of stability and moderate risk.
Types of monthly income plans
Monthly Income Plans usually come in two types based on payout preference:
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Dividend Option
- Investors may get dividends when the fund makes a profit.
- Provides cash flow at intervals, though the amount is not fixed.
- Good for those who want regular income support.
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Growth Option
- No dividends are paid out.
- Earnings are reinvested, helping the corpus grow over time.
- Suitable for long-term wealth creation.
Both types carry the same risk profile, but the choice depends on whether you want immediate income or long-term growth.
Known monthly investment plans you should look for
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Fixed Deposit (FD) Monthly Income Scheme
You invest a lump sum in a fixed deposit for a set tenure and receive the interest as monthly income. This option works best for risk-averse investors who want to preserve their capital.
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Systematic Withdrawal Plan (SWP)
Here, you invest in mutual funds and set up regular withdrawals, either fixed or flexible. It suits investors who want steady income while also keeping the chance for capital growth.
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Senior Citizens Savings Scheme (SCSS)
A government scheme designed especially for senior citizens. It provides a guaranteed income at a fixed interest rate with a lock-in of five years. Ideal for retirees who want assured returns with low risk.
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Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Another government-backed pension scheme for senior citizens, offering fixed returns over a period of ten years. This is meant for seniors who need regular pension income.
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Post Office Monthly Income Scheme (POMIS)
You invest in this scheme for a five-year tenure and receive a fixed monthly income. It’s a safe option for conservative investors who value security and regularity.
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Corporate Fixed Deposits
Offered by financial and non-banking financial companies, these deposits usually give higher returns than bank FDs. However, this risk is also involved at a higher level. You can also choose how often you want the interest to be paid. However, it’s important to check the company’s financial strength before investing.
How to choose the right monthly income plan?
- Be clear about why you are investing and what you want to achieve.
- Look at how the fund invests your money across equity, debt, or other assets.
- Check how the fund has performed in the past, both in good and bad markets.
- See how experienced and reliable the fund manager is.
- Understand the possible risks before investing your money.
- Compare the costs or fees (expense ratio) with similar funds.
- Review the fund’s record of paying dividends regularly.
- Ensure the fund house has a strong track record and reputation.
- Review the scheme document to understand all the details clearly.
Conclusion
Choosing the right Monthly Income Plan becomes easier when you know your goal, compare the options, and weigh the risks against the returns. Always consider factors such as safety, fund performance, costs, and reliability before investing. A careful decision will help you secure a steady income while keeping your money aligned with your needs.
