Mutual Funds
What are the different plans that mutual funds offer?
Income Plan: Under the Income Plan, the fund distributes a substantial part of the surplus to investors in the form of dividend (income distribution).
Growth Plan: Under the Growth Plan, an investor realises only the capital appreciation on the investment (by an increase in NAV) and normally does not get any income in the form of income distribution.
Re-investment Plan: Here the income distribution accrued on a mutual fund scheme is automatically re-invested in purchasing additional units under the scheme. In most cases mutual funds offer the investors an option of collecting income distribution or re-invest in the same scheme at scheme NAV/NAV based price.
Systematic Investment Plan (SIP): Here the investor is given the option of managing his investments on a periodic basis and thus inculcates a regular saving habit. He may issue a pre-determined number of post-dated cheques in favour of the fund. He will get units on the date of the cheque at the NAV of that date. For instance, if on 25th March, he has given a post-dated cheque for June 25th, he will get units on at NAV of 25th June.
Systematic Withdrawal Plan: As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows an investor the facility to withdraw a pre-determined amount/units from his fund at a pre-determined interval. The investor’s units will be redeemed at the NAV as on that day. This would tantamount to a tax efficient mode of withdrawal, if planned well.
Retirement Pension Plan: Some schemes are linked with retirement pension. Individuals participate in these plans for themselves and corporates for their employees. Like UTI Retirement Benefit Plan.
Insurance Plan: Some schemes launched by UTI and LIC offer life/personal accident insurance cover to investors. The example being Unit Linked Insurance Plan of UTI.
