How MIPs are Different from FDs?

How MIPs are different from FDs?

MIPs means monthly income plans. They give you regular monthly income just like Fixed Deposits (FDs).

Many investors don’t know that MIPs are different financial products than the Bank Fixed Deposits. Basically MIPs are the type of mutual funds. They fall under the category of Hybrid Mutual Funds means they invest up to 25% of your money in Equity and up to 75% money in debt and debt related products.

The equity component of MIPs give you the growth of your money while debt gives you the regular income. The main advantage of MIPs over FDs is that, they can give you market driven returns.

If market is good, most of the MIPs will give you more return than the regular bank FDs.

MIP returns are market-driven. That means, the fund manager is under no obligation to declare a monthly dividend, though most fund houses try their level best to declare dividends regularly.
This is the main difference between MIPs and fixed deposits (FDs) that offer assured interests.
However, compared with FDs, MIPs are tax-efficient as dividends declared under MIPs are tax-free.

Who can go for MIPs?

Anyone who want to generate almost fixed returns from their investments more than the regular fixed deposits can invest in MIPs. If you are a retiree and already invested in Bank FDs than you can invest in MIPs also.

Many people argue that, equity is a risky investment so weather MIPs are really safe or not? Well, it is true that equity is the risky investment. But the equity exposure in MIP is low (maximum 25%) so in my opinion, you can go for it. There is no problem in it.