Monday, March 28, 2016

Equity Mutual Funds That Pay Monthly Dividends: How to Grow Your Money Tree.

From past many years I search a equity mutual fund that pay monthly dividends. 

Unfortunately I not find such type of Indian equity mutual fund that pay monthly dividends but I have an alternate that change your idea to locate equity mutual fund that pay monthly dividends.
Before we continue on this idea I want to clear some basic things.
Why I want equity mutual fund that pay monthly dividends?:- If any equity mutual fund pay me monthly dividends then I get regular dividend income which is income tax free in India so I utilize this tax free dividend income as my second income source or I make my own stock portfolio with help of this tax free monthly income.
and my original investment use for wealth creating through mutual funds. I think this is a great idea so I locate such type of funds but result is zero(nil).
Why not we choose MIP ( Monthly income plans):- Many of my readers think that today I put wrong information on my blog because many MIP-MF is available in India like SBI Magnum monthly income plan, Birla sun life MIP etc then why I say I not found any equity mutual fund that pay monthly dividends?
OK,  MIP is a debt mutual fund scheme which invests a small part of his funds (10-25 per cent) in equities and remaining (75-90 per cent) in debts. 
It offers regular income in the form of periodic (monthly, quarterly, half-yearly) dividend payouts.
So MIP is categorized under debt fund and MIP is not treated as equity fund so MIP dividends are debt funds dividends which are tax free but company liable to pay DDT ( Dividned Distribution Tax) in debt fund dividends so overall this DDT reduce my returns on MIP and MIP dividends returns are very poor like a saving account interest.
What Alternate we have to get regular monthly income from equity mutual fund:-Now I tell you my shocking research that how we get regular monthly income from equity mutual fund with mix combination of SIP&SWP. Become your own fund manager and every month sell your fund units to get 1% amount of your fund value as your monthly dividend income. 
Step by Step detail of this Idea:-
1.Make a lum-sum investment of minimum 1.00 lac in any good diversified equity growth fund with good track record of past 5 years. 
2.I advice to make a lum sum investment of minimum 1.00 lac because 1% of this 1.00 lac is 1000 and I want minimum 1000 per month income by selling of my units because selling of fund unit below value of 1000 is not allowed in most of mutual funds. 
3.Now start a 2000 per month SIP in this mutual fund for regular increment in your fund value and monthly tax free gain. 
4. Now wait minimum 1 year to grow your fund with market because selling of mutual fund unit below 1 year holding is taxable in income tax rules. 
5. After 1 year your tree of money is ready for fruits now sell your units every month to get 1% of your fund value for that month. 

I apply this example in HDFC top 200 G fund from 1 march 1999 to 1 march 2016, I provide my excel sheet to you where you see:-
Our total notional investment in last 17 year is 5,08,000 
We get total monthly dividend ( actually not dividend it is long term capital gain from systematic withdrawal) of 13,98,879 Our holding is still in profit of 4,13,527 
Download this excel sheet here:- 
Now it is your time to comment.
My Recent Update:-
Please remember mutual fund investment are subject to market risk and past performance is not a guarantee of future performance author of this blog is not a registered mutual fund adviser so please consult your mutual fund adviser before investing my full discloser is:-
10. Discloser:- Author is not a registered mutual fund adviser but I Mahesh Chander Kaushik author of this research report is an existing research analyst and passed NISM certification for research analysts. I am also registered under SEBI(RESEARCH ANALYSTS) REGULATIONS, 2014 ( SEBI Registration Number INH 100000908 ) hereby disclose about my financial interest in the subject company and the nature of such financial interest:- 1 I am personally not hold units  of hdfc top 200 fund but my wife hold units of hdfc top 200 fund  so my personal interest is included in this fund 2. Me and my associates or relatives have not any actual/beneficial ownership of one percent or more securities of the subject company (  hdfc top 200 fund ). 3. Me and my associates or relatives have not any other material conflict of interest at the time of publication of the research report. 4. Me and my associates or relatives have not not received any type of compensation from the subject company(   hdfc top 200 fund ) in the past twelve months. 5. I am not served as an officer, director or employee of the subject company( hdfc top 200 fund ). 6. I have been not engaged in market making activity for the subject company(  hdfc top 200 fund  )


visshu said...

this a great idea... I will back test this

Mahesh Chander Kaushik said...

Thank you Visshu ji with regards

Unknown said...

Is this method still valid in present times and in which MF scheme it is most profitable. Please elaborate.

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