MIPs : The Best Alternative to traditional FDs

Gone are the days when bank fixed deposits were the only avenues to park your hard earned savings. Today you have a plethora of investment avenues available in the market. You just need to pick up the right one to suit your investment style and risk profile.

MIPs (Monthly Income Plans) are the best alternatives to the traditional FDs. The best rate for a one year FD that you could get in the market (With Nationalised Banks) is max 7-7.5%, whereas you have a plenty of MIPs which are giving returns in excess of 9-10% in the last 5 years. Whats more is the MIP returns do not attract any tax at the hands of the investor. However, your FD interest might attract a tax of upto 30% (depending on what slab does your income fall into).

Basically it is the composition of the MIP portfolios which helps us getting better returns still keeping risk in check. A typical MIP would have a debt proportion of 80% whereas the equity portion to the extent of 20%. The high proportion of debt ensures capital protection and some portion of equity opens opportunities for higher returns.

Having a look at the table below gives a fair idea about how few MIPs have performed over last five years. Although the returns cannot be guaranteed, the market exposure provides some headroom for higher returns. Also, the tax-free nature of investments is an added advantage why MIPs can be flavor of the season.

Scheme Name NAV as on
29th Dec 09
Lastsix months
LastTwelve months
LastThree Years Returns LastFive Years Returns
Reliance MIP 19.95 11.18% 22.58% 12.88% 13.73%
HDFC MIP LT Plan 20.71 9.58% 31.59% 12.27% 13.28%
HSBC MIP 18.2 9.27% 19.45% 11.33% 11.27%
Canara Robeco MIP 26.86 4.55% 28.46% 11.20% 13.99%
Principal MIP Plus 17.85 7.26% 21.70% 12.05% 10.87%
DBS Chola MIP 18.66 5.27% 12.88% 12.00% 10.09%
ICICI Prudential
Income Multiplier Fund
17.89 5.55% 23.95% 7.65% 10.71%

Disclaimer : Mutual Funds Investment are subject to Market Risk. Readers are advised to consult their financial advisor and use their own judgement before making investment decisions.

Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

2 thoughts on “MIPs : The Best Alternative to traditional FDs

  1. Hmm, this looks like a very good option for tax saving.
    I am considering it very seriously for directing my savings.
    Thank you Mr .Bajaj

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