Top Monthly Income Mutual Funds to Invest Online in 2024

Monthly Income Mutual Funds Plan, an open-ended mutual fund, primarily invests in fixed-income instruments. It blends debt and equity funds, allocating over 65% to fixed-income instruments and the remainder to equity-linked instruments for market-linked returns. The main goal is to offer a steady income stream, with options for monthly or quarterly payouts.

Investing in monthly income in mutual fund is straightforward—buy and sell units like any other mutual fund through lump sum or systematic investment plans (SIP). To find the best monthly income plan, explore offerings from various mutual fund companies.

What is Monthly Income Mutual Funds?

A monthly income plan (MIP) or a monthly income mutual fund is a mutual fund scheme aiming to preserve capital and generate cash flow through a blend of debt and equity securities. It serves as an alternative income source, particularly for retirees, often delivering dividends or interest payments.

Designed with a conservative approach to safeguard capital and offer a reliable income source, MIPs generally allocate a small portion to equities, around 20%, with the majority, approximately 80%, invested in debt securities. This strategy seeks consistent returns while allowing for some profit maximization through exposure to equities.

Despite the name, MIPs don’t ensure monthly income. While investors can anticipate regular income during market upswings, bear markets may lead to a decrease. Let us now learn what is the best investment for monthly income with our educational list of investment plans for monthly income. 

List of Best Monthly Income Mutual Funds in India 2024

Here is a list of the top monthly dividend income mutual funds in India for 2024:

Fund Name	3Y Returns	5Y Returns
Aditya Birla Sun Life Regular Savings Fund	2.9%	5.5%
Baroda Pioneer Conservative Hybrid Fund	7.5%	6.7%
DSP Balckrock Regular Savings Fund	2.5%	4.5%
HDFC Hybrid Debt Fund	2.85%	5.06%
ICICI Prudential MIP 25	7.6%	7.7%
ICICI Prudential Monthly Income Plan	7.6%	9.1%
Invesco India Regular Savings Fund	7.4%	6.9%
Reliance Hybrid Bond Fund	-1.56%	1.65%
UTI Regular Savings Fund	1.47%	4%

Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.

Note: The data in the Top 10 MIP funds in India list is from 24th January, 2024.  However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!

Let us now briefly overview these top monthly dividend mutual funds listed above. 

Top 10 Monthly Income Funds Overview 

Here is a brief overview of the best mutual fund for monthly dividend income mutual funds listed above:

Aditya Birla Sun Life Regular Savings Fund

Aditya Birla Sun Life Regular Savings Fund Direct-Growth, a Conservative Hybrid mutual fund by Aditya Birla Sun Life Mutual Fund, has been active for a decade, since its launch on January 1, 2013. The fund manages assets worth ₹1,449 Crores, positioning it as a medium-sized fund in its category. With an expense ratio of 0.95%, comparable to similar Conservative Hybrid funds, it allocates 21.24% to equity and 74.12% to Debt. It is one of the best investment plan for monthly income in India on our list. 

Over the last year, the fund has yielded a return of 7.69%, maintaining an average annual return of 10.45% since inception. Notably, it has doubled invested capital every 8 years.

Baroda Pioneer Conservative Hybrid Fund

Baroda Pioneer Conservative Fund, launched on September 8, 2004, is a hybrid debt fund. Since inception, it has yielded a 6.3% return. The scheme’s primary goal is to secure consistent returns by investing in instruments like corporate bonds, government securities, and treasury bills. It also seeks long-term capital growth by allocating a fraction to equity and related securities. With a moderately high investment risk, it presents an appealing choice for investors seeking both regular income and wealth creation. It is also one of the best investment for monthly income funds on our list. 

DSP Balckrock Regular Savings Fund

Launched on June 11, 2004, the DSP Blackrock Regular Savings Fund is a top monthly income funds scheme. It combines quality debt securities for a secure and consistent return on investment. While primarily focused on debt, it allocates a fraction to equity for long-term capital growth. Despite its moderately high risk, the fund has delivered an impressive 8.5% return since inception. It is also one of the best scheme for monthly income on our list. 

HDFC Hybrid Debt Fund

This outstanding hybrid debt fund stands out as a top choice among monthly income plans. Over the last 5 years, it has consistently delivered an impressive average return of 9.76%, maintaining an overall average return of 10.44% since its inception in 2003. Invest in HDFC Hybrid Debt Fund with just Rs. 5000 lump-sum or Rs. 500 through SIP. It is also one of the best monthly income schemes on our list. 

Primarily focusing on debt instruments like government securities and corporate bonds from entities such as ICICI Bank, SBI, Infosys, and L&T, this scheme aims to offer regular returns and long-term capital growth. Tailored for investors with a moderate risk appetite, it’s an ideal choice for those seeking a steady income stream and the potential for long-term capital appreciation.

ICICI Prudential MIP 25

This top-tier monthly income mutual funds plan strives to create consistent earnings through significant investments in debt and money market instruments. While predominantly focusing on debt, it allocates a small portion to equity for long-term capital appreciation. With a moderately high risk profile, the fund has yielded a 9.8% return since inception. Ideal for investors with a moderate risk appetite seeking both regular returns and capital appreciation, this plan stands out as a lucrative option. It is also one of the best monthly income plans on our list. 

ICICI Prudential Monthly Income Plan

The ICICI Prudential Monthly Income Plan stands out as a premier monthly income funds scheme, functioning as a hybrid debt fund primarily focused on debt instruments. It aims to provide consistent returns and capitalize on potential growth. Ideal for low-risk investors seeking a steady income stream, this fund ensures a reliable financial flow. It is also one of the best mutual fund for monthly income on our list!

Invesco India Regular Savings Fund

Invesco India Regular Savings Fund, launched on June 1, 2010, stands out as a premier monthly income fundsfunds plan among hybrid debt funds. The primary goal is to secure consistent income by investing in a diverse portfolio of fixed income securities, including Gold ETF, equity, and related instruments. With a moderately high risk profile, the fund has yielded a 6.9% return since inception. Ideal for individuals with a moderate or low-risk tolerance seeking regular returns on investment.

Reliance Hybrid Bond Fund

Reliance Hybrid Bond Fund is a top-tier monthly income funds plan offering consistent returns. Over the last 5 years, it has delivered an impressive 9.84% return. With a minimal investment of Rs.5000 lump-sum or Rs.500 through SIP, investors can participate in this hybrid debt-oriented fund. It is also one of the best income plans for monthly returns on our list. 

Focused on debt and money market instruments, the fund aims to provide a secure and steady return on investment. Additionally, a small portion is allocated to equities for capital appreciation. Ideal for those with a moderate to low-risk appetite, this fund caters to investors seeking a blend of capital appreciation and regular returns.

UTI Regular Savings Fund

Since its inception, UTI Regular Savings Fund has delivered a 9.72% return. Invest with just Rs.5000 lump sum or Rs.500 through SIP. Over the past 5 years, it yielded 10.18%, averaging 8.44% in the last 3 years. This monthly income plan, categorized as a debt-oriented fund, primarily invests in instruments like government securities and corporate bonds. Ideal for individuals with a moderately high-risk appetite, it offers a consistent return on investment and capital growth.

Types of Monthly Income Plans

Monthly Income Plans (MIPs) in mutual funds offer investors the opportunity to earn regular income while also aiming for capital appreciation. There are several types of MIPs available to investors:

• Equity-Oriented MIPs: These plans primarily invest in a mix of equities and fixed income securities. They aim to generate higher returns by allocating a significant portion of the portfolio to equities while also providing regular income through fixed income instruments.
• Debt-Oriented MIPs: These plans predominantly invest in fixed income securities such as bonds, debentures, and government securities. They aim to provide stable income with lower risk by focusing on debt instruments while also offering the potential for capital appreciation.
• Balanced MIPs: These plans maintain a balanced allocation between equity and debt instruments. They aim to strike a balance between generating returns and managing risk by diversifying across asset classes.
• Dynamic MIPs: These plans have the flexibility to adjust the allocation between equity and debt based on market conditions. Fund managers actively manage the portfolio to capitalize on market opportunities and mitigate risks.
• Growth-Oriented MIPs: These plans focus on capital appreciation over regular income. They primarily invest in equities and other growth-oriented assets to achieve long-term capital appreciation while providing minimal income distribution.

How do Monthly Income Mutual Funds Work?

Investors must assess income needs and risk tolerance before considering these plans. No mandatory monthly dividends exist; payments may be skipped during weak profit periods.

For suitable investors, a Monthly Income Plan (MIP) provides a reliable retirement income stream. Problems arise when retirees deplete their savings, resorting to irregular withdrawals for expenses.

Monthly income plans ensure a consistent monthly income, facilitating precise budgeting and reducing the risk of overspending—akin to annuities. Equity composition varies; some funds focus on specific company sizes, while others adopt a mixed approach.

Features of Monthly Income Mutual Funds 

Mutual fund Monthly Income Plans present a range of distinctive features that make them an appealing investment option for those seeking regular income streams.

1. Steady Income Generation: Monthly Income Mutual Funds are designed to provide investors with a predictable and steady income on a monthly basis. This feature is particularly attractive for individuals looking to supplement their monthly cash flow.
2. Risk Management Strategies: The monthly income funds scheme in MIP mutual funds often incorporate risk management strategies to navigate market fluctuations and economic uncertainties. This proactive approach aims to ensure a consistent income flow even during challenging financial periods.
3. Diversified Portfolio: Monthly Income Plan Mutual Funds typically maintain a diversified portfolio, including a mix of assets such as stocks, bonds, and other income-generating securities. This diversification helps spread risk and enhance the stability of returns.
4. Professional Fund Management: Investors benefit from the expertise of professional fund managers who actively monitor and adjust the fund’s holdings. This active management aims to optimize performance and adapt to changing market conditions.
5. Flexibility in Dividend Payments: While Monthly Income Mutual Funds focus on regular income distribution, they offer flexibility in dividend payments. During periods of lower profits, funds have the option to adjust or skip dividend payments, aligning with market conditions.
6. Investor Suitability: Mutual Funds Monthly Income Plans cater to investors with a preference for a regular income stream, making them particularly suitable for retirees or individuals looking for a consistent source of cash flow.

Who Should Invest in Monthly Income Mutual Funds?

For retirees seeking consistent cash flow to cover regular expenses, Monthly Income Mutual Funds (MIMFs) prove invaluable. The Systematic Withdrawal Plan (SWP) feature within these funds becomes a highly convenient and effective means for generating a steady income stream.

Additionally, individuals facing the challenges of increasing living costs can consider MIMFs with SWP as a viable source of supplementary income. Whether it’s ensuring financial stability during retirement or managing the impact of rising expenses, MIMFs with SWP cater to the diverse needs of investors seeking regular and additional income.

Factors to Consider Before Investing in Monthly Income mutual Funds  

Define Financial Goals

• Assess your financial objectives and risk tolerance.
• Clearly outline income needs in alignment with potential fund returns.

Performance Analysis

• Evaluate the fund’s historical performance across different market conditions.
• Examine past dividend payment trends and resilience during economic uncertainty.

Diversification

• Review the fund’s portfolio to understand asset types and sector diversification.
• Opt for well-diversified funds to enhance resilience against market fluctuations.

Fees and Expenses

• Consider the fund’s expense ratio and any additional charges.
• Choose funds with competitive fees to optimize investment returns.

Manager’s Strategy

• Stay informed about the fund manager’s investment strategy and approach.
• Ensure a clear strategy and effective management align with your financial goals.

Risks Involved While Investing in Monthly Income Mutual Funds

Embarking on the journey of the best monthly income funds plans entails acknowledging and understanding potential risks. Here are critical aspects to consider:

Unpredictable Income Streams

Contrary to popular belief, monthly income plans do not assure fixed monthly returns. The income stability depends on the dynamic interplay of fund performance and market conditions, given their equity investments.

Dividends Linked to Profit, Not Principal

Monthly Income Plans Scheme dividends are tethered solely to additional income, excluding the capital investment. Market fluctuations, leading to slow NAV rises or falls, may result in the non-declaration of dividends.

Taxing Dividends

Opting for an MIP with a dividend option introduces Dividend Distribution Tax (DDT) on periodic earnings. This taxation element alters the presumed tax-free nature of returns.

Fiscal Implications and Exit Challenges

Certain Monthly Income Schemes enforce extended lock-in periods, some lasting up to three years. Selling before maturity incurs an exit load. Additionally, as MIPs predominantly invest in debt instruments, their tax implications align with debt investments.

Benefits of Investing in Monthly Income Mutual Funds

Investing in Monthly Income Mutual Funds presents a range of advantages for savvy investors.

1. Steady Income Streams: Monthly Income Mutual Funds deliver a reliable and regular income, providing stability for investors seeking consistent cash flow.
2. Precision in Budgeting: With a set monthly income, investors can budget more accurately, helping to manage expenses and financial planning with greater ease.
3. Mitigation of Overspending Risk: These funds contribute to disciplined spending habits by minimizing the risk of overspending, fostering financial prudence.
4. Tailored to Retirement Needs: Particularly beneficial for retirees, Monthly Income Mutual Funds offer a tailored solution to meet the income needs of those in their retirement years.
5. Diverse Equity Exposure: Investors can benefit from a diversified portfolio with varying equity exposures, catering to different risk appetites and preferences.
6. Professional Management: With these funds, investors leverage the expertise of professional fund managers, ensuring that investment decisions align with market dynamics and financial goals.

Let us now learn how to get monthly income from mutual funds, by choosing the best income funds for monthly returns!

How to Choose Best Monthly Income Mutual Funds for investing?

When selecting mutual funds monthly investments, consider your financial goals, risk tolerance, and investment horizon. Follow these steps to make informed decisions:

1. Define Your Objectives: Clearly outline your financial objectives, whether it’s steady income, long-term growth, or a combination of both.

2. Assess Risk Tolerance: Understand your risk tolerance. Different funds carry varying levels of risk, so choose funds aligned with your comfort level.

1. Check Historical Performance: Examine the historical performance of the funds you’re interested in. Look for consistency in delivering monthly income and overall returns.

2. Diversification Matters: Opt for funds that offer a diversified portfolio. This helps spread risk and enhances the potential for stable returns.

3. Expense Ratios: Keep an eye on expense ratios. Lower expenses can contribute to higher net returns over time.

4. Distribution Policies: Understand the fund’s distribution policies. Some funds may skip monthly payments during challenging market conditions.

What are the Returns on Monthly Income Mutual Funds & How are they Calculated?

Calculating returns on Monthly Income Mutual Funds involves a straightforward process. These MIP in mutual funds typically generate income through dividends and interest from the underlying investments.

The total return is the sum of these income distributions and any capital appreciation or depreciation. Investors should be mindful of the fund’s expense ratio, which affects the overall return. This ratio includes management fees and operating costs, reducing the net return to investors.

It’s essential to review the mutual fund with monthly income’s historical performance and understand the strategy employed by fund managers in selecting income-generating securities. Regular monitoring ensures investors stay informed about potential changes in the fund’s performance and adapt their investment strategy accordingly.

Taxability on Monthly Income Mutual Funds

Investors exploring Monthly Income Mutual Funds (MIMFs) should be mindful of the tax implications associated with these investment vehicles. The taxability of MIMFs is influenced by the type of income generated.

Dividend Income

Monthly dividends received from the monthly income best investment plans are typically subject to dividend distribution tax (DDT). However, investors should stay informed about any changes in tax regulations that might impact the tax rate on dividend income.

Capital Gains

Gains arising from the sale of mutual fund units, including MIMFs, are categorized as capital gains. The tax treatment depends on the holding period—short-term or long-term. Short-term capital gains are usually taxed at the investor’s applicable income tax slab rate, while long-term gains may qualify for lower tax rates with indexation benefits.

TDS (Tax Deducted at Source)

Investors should be aware of TDS provisions applicable to MIMFs. TDS may be deducted on dividend income if it exceeds a specified threshold limit.

To Wrap It Up…

Investors must stay vigilant, adapting to market trends and economic shifts. The quest for the best monthly income mutual funds is a personalized journey; consider individual financial goals, risk tolerance, and investment timelines. Through informed decision-making, aided by research and expert advice, you can construct a portfolio that not only ensures a reliable monthly income plans but also positions you for enduring financial success.

In the dynamic world of mutual funds, adaptability is key. As the definition of “best” evolves, stay informed, stay flexible, and let your investments actively contribute to your path to financial security.

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