Investment in Regular Income Plans in Mutual Funds are growing popular option for investors because of variety options for creating a big capital over the time span. liquidity also available for many funds if you need sudden withdrawal. Regular Income Plans in MF also support for monthly income option which is made for those who need an extra amount for any targeted expenses.
Many investors opt for regular income from MF like an 2nd salary. Regular income plans in Mutual Funds offer two types of options. One is Dividend Payout and another is Systematic Withdrawal Plan (SWP).
Are Monthly Income Plans dividend Funds ?
Dividend Mutual Fund like a Growth Fund. In Growth Fund earned amount by selling shares of the fund reinvested for growth by the fund mangers. In Dividend Plan profits are distributed as payout to the investors in regular intervals. But in Dividend payout, there is no certainty about how much they are going to pay. It depends of profit that fund managers gain time to time. Investor can choose the frequency for payout as Monthly, quarterly, daily or yearly.
Is SWP Regular Income Plans in Mutual Funds ?
An Alternative option of Monthly Income Plan Is SWP or Systematic Withdrawal Plan. Investor can withdraw every month a certain amount for a certain period regularly from his fund. It help him to get regular income monthly like salary. Investors can decide how much he will withdraw for how long and also can change according to market ups and downs. It means, If he want to get 8% every month for 10 years. when market fall, his funds also reacted, so then he can decide to withdraw 5% instead of 8% for balancing his fund. it can prevent him to erode his funds.
Which one Is Better Option In Regular Income Plans between SWP and Dividend Funds ?
Most of investor prefer SWP Income Plan for the regular or monthly income because of a fixed certain amount regular income for a certain period of time and also capital gain. Regular withdrawal after a certain limit, invested amount with profit made withdrawn. Rest are invested for the future will be total gain. So SWP is much more appealing for better gain.
On the other hand Dividend pay out is uncertain. If fund managers not able to get targeted profits for the month, there will be no Dividend declared for the month. No income at the end of month. if accrued profit of the funds are not reinvested in growth fund, your return may effect significantly. Dividend payout is taxable for the company. DDT of more than 12.5% from the dividend will be deducted, where as SWP is liquid fund. So no Dividend no DDT has to be paid.
Flexibility Of Return
Flexibility of monthly income plans are more significant. In that case SWP is more popular also. In SWP depending of the return for the month investor decide how much he/she would like to withdraw. If they used to withdraw 8% per month, they can choose 5% for the particular month for withdraw if return is not at the mark. Depending on profitability Investors can increase or decrease the amount of withdrawal and also change the duration of getting SWP.
In case of dividend they have to depend on Mutual Fund Company for the options which is available for the particular plan. They can only choose whether opt for dividend or not. Depending on profitability the duration and amount decided by the Mutual Fund company.
Suggestions for more profitability
Withdrawal of money from invested capital is not profitable option. In Mutual Fund investment, Reinvested of return is the key for boosting growth in long term. If investors opt for monthly return at the starting of investment that could be hurt the base growth system. Rather investors opt for at least 5 years growth plan and after accumulation of good amount of capital he can opt for monthly income. That will help to grow his funds as well as monthly return amount will be much more significant.
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