MIPs Vs SIPs: Know The Difference?

A monthly Income Plan (MIP) 

A monthly income plan (MIP) is a mutual fund strategy that primarily invests in debt and equities securities to create cash flows while also protecting capital.

An MIP is designed to generate a consistent stream of income in the form of dividends and interest. As a result, it's usually appealing to retirees or older citizens who don't have other reliable monthly income streams.MIPs, despite its name, do not guarantee monthly income. When the market is robust, investors can expect a constant source of income, but bear markets can bring a fall. Market volatility has an impact on the amount of stock exposure. 

SIP( Systematic Investment Plan)

SIP, or systematic investment plan, on the other hand, is a method of investing in mutual funds. It is not a standalone product, investment opportunity, or instrument. It's simply a method of accumulating a good corpus by making little but consistent contributions.It is usually considered an effective method if you have a long-term investing goal in mind.

SIPs are the most efficient way to invest since they allow you to put money into mutual funds for the future without disrupting your current lifestyle or spending habits. You can invest little sums on a weekly, fortnightly, or monthly basis as needed.

Method Of Investing

SIPs allow you to set a specific amount to be deducted from your account at a specific time. You can also invest in a variety of financial instruments, such as equities mutual funds, debt mutual funds, and so on, depending on your risk tolerance and financial objectives. In the long run, i.e. if invested for a longer time, SIP investments typically provide superior returns.

Because a defined sum is to be invested at regular intervals, SIPs encourage and assist you in developing a habit of investing. Cost averaging can help you save money by allowing you to buy more units when the market is low and fewer units when the market is high.

Ways To Invest In Mutual Funds in 2024

When you decide to invest in a Mutual Fund, you must first decide on how you want to invest (if offered by the fund). There are two options offered to you:

1. MIP
2. SIP

Let us understand both the type of investments in detail here:

MIP

You make a single investment of the complete amount you desire to put in the fund when you choose a lump sum investment. So, if you wish to invest Rs.50,000 in a mutual fund using the lump sum technique, you'll need Rs.50,000 on hand to invest.

SIP

You can start investing with a small amount if you choose a SIP, on the other hand. To get started, most mutual funds require a minimum investment of Rs. 500/1000. As an example, if you wish to invest Rs.50,000 over ten months, you can put aside Rs.5000 each month.

Take Away

Generating a significant regular monthly income to supplement or replace a wage or other source of earned money is a desire for everyone, but it is a requirement for retirees. A goal like this can only come true if you have a sizable savings account to invest in a lump sum and earn a decent return.

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Disclaimer: This article is issued in the general public interest and is meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.