For a monthly income

I have Rs 12 lakh to invest that I want to invest in monthly income schemes. I plan to split this corpus between Post Office MIP and HDFC MIP Long-term. Please advise

-Sridhar K Veena

If regularity of income and safety of capital are your prime concerns, government backed Monthly Income Plans (MIPs) do make sense. They are suited for a person looking for regular income. Scheme such as Post Office MIP will enable you to earn a fixed return of eight per cent. You may even invest in Senior Citizens Savings Scheme, that allows you to invest a maximum of Rs 15 lakh and earn a higher return of 9 per cent (compounded quarterly).

Alternatively, you may go ahead with your plan to split your corpus between Post Office MIP and HDFC MIP Long-term. The latter aims to generate regular returns through investments, primarily in debt and money market instruments (minimum of 75 per cent of its total assets). But remember, an MIP that is part of mutual fund would involve risk and does not have a guarantee of either assured returns or capital protection.

Recently ICICI Pru Fusion S-II Retail-G has become an open-ended fund. Should I remain invested in it?

-Rajesh Agrawal

ICICI Pru Fusion S-II Retail was initially launched as a closed-end fund in March 2007. The fund invests at least 70 per cent in equity and equity-related instruments. The remaining 30 per cent is in debt and money market securities. The fund is predominantly a mid-cap and small-cap oriented fund and, hence, aggressive in nature. Such funds should form only a small part (up to 20 per cent) of your entire portfolio.

The fund’s performance has not been impressive enough as compared to those of other mid-cap and small-cap funds in the category. Hence, exit this fund. If you have some large-cap funds in your portfolio and want to invest in a mid-cap fund that may boost your overall returns in a bull rally, invest in ICICI Prudential Discovery or BSL Mid Cap Plan A.

However, if this is the only fund in your portfolio, choose funds such as ICICI Prudential Dynamic or HDFC Top 200, which invests in large-cap stocks. These funds generally provide stable returns, both during rising markets and also manage downside risk in a declining market.

I want to invest in a tax-saving fund. Please suggest some good funds. Also, do give returns & star ratings.

-V Mehta

By investing in Equity Linked Saving Schemes (ELSS), an investor gets a tax deduction under section 80C of the Income Tax Act for investments up to Rs 1 lakh. But, these funds have a lock-in period of three years. Some of the good tax-saving funds include Sundaram BNP Paribas Taxsaver, Canara Robeco Equity Tax Saver and Fidelity Tax Advantage.