5 Best investments to get monthly or regular income

Best investments to get monthly or regular income

While there are several investment options available, I keep getting comments on blog or email messages asking what are the investment options available where one can get monthly or regular income. While I was evaluating several investment options, I found there are 5 investment options where one can invest and get monthly or regular income. In this article, I would detail about various investment options to get regular income, its features, positive and limiting factors.

Also read: Bank FD Vs Debt Mutual Funds – Which is better investment options

Best investments to get monthly or regular income

1) Post office MIS Scheme (POMIS)

• If you are zero risk taker and want to get regular income, you can invest in Post office MIS Schemes to regular monthly income.
• You need to open POMIS for 5 year period.
• Fixed returns of 8.4% per annum are paid every month. E.g. if you invest Rs 100,000, interest amount would be Rs 8,400 per annum and you can expect monthly income of Rs 700.
• Such income should be added to your income and necessary income tax needs to be paid. 
• This investment option would not be suitable for investors who are in high tax bracket, as post tax returns would be very low.

2) Bank fixed deposits

I need not tell you that this is every one’s favorite investment option. If you are conservative and low risk taker, you can opt for bank fixed deposits to get regular monthly / quarterly / yearly income. Please note that not all banks are offering monthly interest payment. They are generally offering quarterly or yearly payment.

• Bank FD’s would offer fixed returns between 8% to 9% per annum. E.g. if you invest Rs 100,000, interest amount would be Rs 9,000 per annum (9% per annum interest rate) and you can expect monthly income of Rs 750.
• Bank would deduct TDS of 10% if you submit PAN card. If you do not submit PAN card, TDS would be 20% on the interest amount. The interest amount needs to be added to your income and necessary income tax has to be paid irrespective of what bank has deducted.
• This investment option would not be suitable for investors who are in high tax bracket, as post tax returns would be very low.

3) Monthly Income Plan (MIP) Mutual Funds

MIP Mutual funds are those whose objective is to provide regular dividends to its investors.

• Unlike Bank FD or Post office MIS Scheme, the returns are not guaranteed in MIP Mutual funds. They would fluctuate and are in the range of 8% to 9% per annum. Means if you invest Rs 100,000, assuming a return of 9%, you can expect a monthly (assuming they would pay every month) return of Rs 750.
• There is no guarantee that MIP mutual funds would provide regular monthly returns. Thought the objective is to provide regular returns, sometimes these mutual funds would not pay any amounts for several months.
• Since the amounts paid are dividends, no income tax is applicable once it is in the hands of investors. Means, the returns are tax-free.
• This is the best investment option for individuals who are in high tax bracket of 20% or 30% as the returns received are tax free.
• Some of the good MIP mutual funds are Birla SL MIP II Savings 5 or ICICI Pru multiple Yield Plan A or Plan B etc.

4) Debt mutual funds with dividend options

I would not say that this is monthly income option, but it would fall under regular income option. You can invest in debt mutual funds with dividend option so that you would get regular dividend through this.

• The dividends amount is not guaranteed and can fluctuate between 6% to 10% per annum.
• Dividends received are tax free in the hands of investors.
• This too is good investment option for individuals who are in high tax bracket as returns are tax-free.
• Some of the good debt mutual funds are like SBI Dynamic Bond Fund or IDFC Dynamic Bond Fund etc.

Also Read: Benefits of Systematic Withdrawal Plan (SWP) in Mutual funds

5) SWP through debt mutual funds with growth option

• I have been debating on this method for some time whether this can be treated for regular income option.
• Debt mutual funds with growth option would provide good returns if invested for medium to long term period.
• However what I am talking here is Systematic Withdrawal Plan (SWP) for such options. Means if you invest Rs 100,000 in debt funds where the returns would range between 8% to 10% per annum, assuming 10% returns, one can expect a return of Rs 10,000 per annum. So you can do a SWP for Rs 833 per month and treat this as regular “in-flow”.
• One should be little cautious as you are withdrawing the amount from your overall investment irrespective whether an investment option is yielding a return or not. For some reason, if your investment is not getting say 10% returns, but you are withdrawing 10%, means you are withdrawing the money from your capital and not from returns.
• From tax point of view, if you do SWP, you need to pay short term capital gain tax within one year. However after one year, it falls under withdrawing the capital amount, hence no income tax is applicable on such as amounts.
• This is good method for those who want regular income, but want to invest for long term benefit.

Conclusion: There are only a few monthly or regular income options available now. My advice is to invest them in various options to gain experience and select one which is best suitable based on your risk appetite, period of investment and tax point of view.

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Suresh
Best investments to get monthly or regular income

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Suresh KP

Founder at Myinvestmentideas.com

Suresh KP is the Founder of Myinvestmentideas. He is NISM Certified - Investment Adviser and NISM Certified - Research Analyst. He has been analyzing financial markets in the last 20 years.He can be reached at suresh@myinvestmentideas.com

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