UTI MIS Advantage Plan - Advantage of safety with some spice: Buy

The fund’s larger allocation to debt instruments helps reduce risk

Investors with a low risk profile could consider the UTI MIS Advantage Plan.

The fund invests around 75 per cent in debt instruments while allocating around 25 per cent to equities. The larger allocation to debt instruments helps reduce risk. The equity component gives potential to spice up returns.

Over the last one, three and five years, the fund has outperformed its category average by 0.5-1.5 percentage points, delivering annualised returns of 9.8, 10.4 and 11.3 per cent.

Choose growth option

The monthly dividend option of UTI MIS Advantage Plan has declared dividends consistently since launch with the average pre-tax dividend yield of 0.5 per cent. However, relying on the dividend option for regular income may not be a great idea.

Although the fund has consistently paid dividends since inception, paying dividend is not mandatory for mutual funds. Besides, they can declare dividends only if they have realised profits. Secondly, dividends also suffer a dividend distribution tax of 28.84 per cent before being given out.

Instead, investors can choose the growth option and hold for at least three years. As per the current law, long-term capital gain tax is levied on the gains when the units are held more than 36 months. The gains are thus taxed at 20 per cent with indexation benefits. For regular income, one can initiate Systematic Withdrawal Plan post completion of three years.

Portfolio

Over the last three years, the fund has maintained a well-balanced portfolio by allocating 23-26 per cent to equities and the rest to debt. On the equity side, the fund follows a multi-cap approach, investing across sectors and market capitalisation.

The ratio of large vs mid-cap stocks stands at 68:32 as per the fund’s latest equity portfolio. Financial services (38 per cent), consumer goods (14.8 per cent) and IT (11.3 per cent) are the top three sectors. Bajaj Finance, IndusInd Bank and YES Bank are the top stocks.

In the fixed income portfolio, the fund manager takes active duration calls. The average maturity of the portfolio has come down to 5.3 years from seven years over the last one year.

During the period, the fund has almost halved its exposure to government securities (to 18.5 per cent from 37 per cent) and has doubled its exposure to corporate bonds (to 52 per cent from 26.5 per cent). AA rated bonds comprise one-fourth of its portfolio currently.

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