Does MIP actually have monthly payout?
No. It does not. This is a classic fraud on the unsuspecting Indian public. When SEBI banned guaranteed schemes, UTI had to close down its Monthly Income Scheme. At that time to get the people to invest in MONTHLY INCOME SCHEMES was easy for the existing funds. So Amfi and Sebi allowed the MF industry to play this game, and this new product was born and it continues to attract pensioners, etc. to put their money in such schemes.
So to repeat MIP does not have a monthly payment scheme. It is just a product created by the AMC to tap the money going out of UTI.
It is a balanced fund with about 70-80% of the corpus in debt funds and the balance in equities. It is treated like a debt fund from the taxation point of view.
What is the difference between direct and regular plan?
Well nothing except the price! A direct plan is something that you buy without any adviser compensation. In case of a regular plan the adviser is compensated by the Asset management company. In case you go to an adviser for consulting, he will either charge you a fee and let you do a direct buy (fee model) or charge a small fee (or do away with that wholly) and ask you to invest in a regular plan.
What is the difference between dividend, dividend reinvestment and growth plans? How is tax treatment different?
There are broadly 2 plans – a dividend plan and a growth plan. The dividend plan pays out a dividend in cash (or it is reinvested). In the growth option the unit holder gets no cash flow, but gets appreciation of the value of the asset.
The dividends are tax free in the hands of the unit holder (however tax is deducted by the asset management company). In case of capital gains it is taxed at as long term capital gain or short term capital gain depending on the length of the holding period. Long term and short term definitions are different for debt schemes and equity schemes.
Why does the same fund house have several mutual funds?
Your question seems to be “why does one Amc have many schemes?” – well it is like a hotel / restaurant. There have to be many items on the menu because there are many people who come to the hotel and not all of them have the same needs. So a big businessman who wants to park Rs. 10 crores for 1 week is very different from his driver who wants to invest Rs. 1000 per month for the next 20 years. Also the same person may require different schemes (equity/debt) for different time periods. Even among equity funds he may be craving for some variety – on market capitalization (large cap, mid cap, small capitalization), in debt (short term, long term) on debt (more risky, less risky in terms of duration and rating)..and a few funds which would be hybrid…i.e. a combination of debt and equity. Then there are metal funds like Gold fund….see it is a virtual menu card out there…

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  1. Dear Sir,

    It would be useful if you can name the existing products in the market so that we can be aware of (not)investing …

  2. Very Nice explaination of “Why does the same fund house have several mutual funds?” Subra. Your articles are always refreshing and right to the point and simple to understand (some are mind boggling)…

  3. My understanding is that though there is no guarantee of monthly payout in MIP, these do try to pay monthly. I have reliance Monthly income plan with monthly payout and at least for past five years it is giving consistently giving dividends (at least 11 out of 12 months payments). The amount is also pretty stable.
    That being said, they did stop payment in 2008 and if I remember correctly, they only paid thrice that year. Dividends are just below FD even if we take taxation of FD into account.
    Hopefully this is supplemental knowledge and will benefit people.

  4. I am not sure if this is possible at all but ideally I think every AMC should have only one fund on a specific category, I.e., Large Cap, Mid Cap, Small Cap, MultiCap, Debt Fund etc so the investor wont find it hard to select a fund.

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