finance concept in capital budgeting decision

May 28th, 2015
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Abilene Christian University
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MIPs are typically suitable for investors who want to largely play it safe. They are for conservative investors who might be investing for the first time and are eyeing marginal exposure to the equity market. These investors don’t mind taking a little risk in order to increase the potential returns that pure income/debt funds or fixed instruments will provide. Also, MIPs are better for investors who are nearing retirement, do not have any other substantial source of regular income and do not mind a marginal additional equity risk.

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Why monthly income plans are better than FDs?An MIP, as the name suggests, provides investors with a monthly income. Well, almost. MIP is similar to your bank deposit with a monthly interest option, but unlike a fixed deposit where interest rate is known before you invest and the capital is repaid to you when you close it, neither the returns nor the capital is guaranteed in an MIP.Who Should Invest?MIPs are typically suitable for investors who want to largely play it safe. They are for conservative investors who might be investing for the first time and are eyeing marginal exposure to the equity market.These investors dont mind taking a little risk in order to increase the potential returns that pure income/debt funds or fixed instruments will provide. Also, MIPs are better for investors who are nearing retirement, do not have any other substantial source of regular income and do not mind a marginal additional equity risk.In MIPs, typically a large portion (75-100 %) of the fund is invested in debt and money market instruments and the rest (0-25 % approximately) in equity. The equity portfolio of an MIP can provide additional returns when the market is bullish.PerformanceWith the Sensex touching 20000, the equity market seems to be on a strong wicket. MIPs, on an average, have managed to deliver over 7% returns over the past one year, partly aided by a decent rally in the equity market. Crisil MIP blended index over the past one year have shown returns of around

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