MIPs can make ideal choices for investors with a moderate risk appetite. For example, investors who can't take on the risk levels associated with a diversified equity fund or even a balanced fund can consider making investments in MIPs.

The segment first shot to prominence in 2003 when a number of fund houses launched their MIP offerings. They were positioned as products which offered the stability of debt and the power of equity.

While this is what MIPs can do in an ideal scenario, the risks associated with the product were almost never conveyed to investors. For example MIPs are expected to provide regular (monthly) income, however the returns are not assured. Sadly unscrupulous distributors and investment advisors never revealed these aspects of MIPs to investors.

This mis-selling coupled with a downturn in the equity markets led to a lot of disillusionment among investors.

A noteworthy feature about MIPs is the wide range of options available to investors. MIPs can be segmented based on the equity component in their portfolios; for example conservative MIPs (investing 5%-10% in equities), moderate MIPs (investing 15%-20% in equities) and the aggressive ones (investing 25%-30% of their corpus in equities). Effectively every investor has the option of investing in line with his risk appetite.

Another factor which warrants investments in the MIP segment is the limited options available to the low risk investor. The rationalisation process has adversely impacted the small savings segment; also pure debt funds are unlikely to be very attractive investment propositions going forward. MIPs (powered by the presence of an equity component) are equipped to provide the much-needed kicker to investors' portfolios.

Interestingly, the limited equity component ensures that the investor doesn't deviate from his risk profile either.

The equity markets seem to have hit a purple patch presently and look like they could do no wrong. However investors should block all the 'noise' and refrain from making investments contrary to their risk appetite.

This is especially true for investors with a modest risk appetite who feel that they are missing out on the bull run. The solution to this dilemma could lie in MIPs as well.

Our advice to investors -- MIPs can add significant value and investors must consider making allocations in line with their risk appetite.

Money Simplified, a publication from Personalfn, is now arguably India's most popular online financial planning guide! Get your free copy today! Click here