Best Investment Plan for Monthly Income
Best Investment Plan for Monthly Income
There are several investment options in India, where one can get regular monthly income. Some monthly income plans are high risk and some are safe investment options. Some provide guaranteed returns, while some provide regular returns, though not guaranteed. Each one has its own pros and cons. If you want to invest a lump sum and looking to get regular monthly income, this article is for you. Which is the Best Investment Plan for Monthly Income? Which is the Good Monthly Income Plan in India that can provide regular income for senior citizens?
Also Read: Best Investment Options for higher returns
Who would require monthly income?
Before we jump into the investment plans that provide regular income, let us quickly check who would really require such monthly or regular income.
1) In the old age or after retirement, comes the phase when the people become feeble and unemployed. They keep thinking how to get monthly income from investments in India. That time they look for investments that can provide them with steady and regular income. This helps them to plan their financial requirements and restructure them accordingly.
2) There are even many other investors who might want to invest a lump sum and get a regular second income apart from their salary or business income.
Best Investment Plan for Monthly Income / Regular Income
Here are the few investment ideas that offer regular and monthly income.
1) Post Office Monthly Income Scheme (POMIS)
For the investors, who want to move very safe with their investments with the hope of earning continuous income, Post Office MIS is a very good option.
The minimum investment amount is Rs 100 and the maximum limit is Rs 4.5 Lakhs. One can invest through the joint account up to Rs 9 Lakhs.
It is a one-time investment and you can get regular monthly income.
The rate of interest is fixed every quarter. From Oct to Dec-2019 period, it is 7.6% per year.
The maturity period of this scheme is 5 years. However, one can withdraw earlier after the completion of one year of deposit with a certain percentage of deduction in interest rate.
If you are senior citizen or low risk investor and looking for a safe investment and get monthly income, POMIP could be one of the best monthly income schemes in India.
2) Corporate Fixed Deposits
Corporate fixed Deposits are the deposits issued by private and public companies that work very much like bank FDs. Many Non-Banking Financing Companies (NBFCs) and Housing Finance Companies provide the facility to invest in FDs at slightly higher interest rates.
They offer returns on cumulative (where interest is added to the deposit and paid on maturity) and non-cumulative (where interest is paid-out at certain interval) basis with additional interest rates between 0.25% to 0.50% of senior citizens.
In almost all the cases, the corporate FD returns are higher than the Bank FDs but as a rule of thumb says higher the return, the higher is the risk involved. So, one should ensure high credibility and consistent, stable AAA rating from CRISIL for the companies.
To diversify the risk, one can invest the amount in different corporates which will also ensure regular flow of money.
Here are few Top Rated Corporate Fixed Deposits
i) Shriram Transport FD offer interest rates up to 10.17%. These are rated as CRISIL-FAAA/Stable and ICRA as MAA+ (Stable) that indicates a high degree of safety and high credit quality respectively.
ii) Bajaj Finserv FD offer interest rates up to 8.7%. These are rated as CRISIL-FAAA/Stable and ICRA as MAAA (Stable) that indicates a high degree of safety.
iii) Mahindra Finance FD offer interest rates up to 8.7%, depending on the tenure. These are rated as CRISIL-FAAA/Stable that indicates a high degree of safety.
iv) LIC HFL FD offer interest rates up to 7.6% interest rates. These are rated as CRISIL-FAAA/Stable.
If you can take some risk, investing in corporate fixed deposits would be one of the best monthly income plan in India.
3) Senior Citizens Saving Scheme (SCSS)
A special saving scheme is offered by the Post Offices of India for the senior citizens (above the age of 60) known as Senior Citizen Saving Scheme. It is a risk-free investment instrument that offers excellent returns.
The minimum investment amount is Rs. 1,000 and the maximum limit is Rs. 15 Lakhs.
It must be availed within the first month of receiving the retirement benefit and the investment amount cannot be greater than the benefit received.
It offers quarterly interest payment and the interest is payable on the 1st working day of January, April, July, and October.
The current Post Office SCSS interest rate for Oct to Dec 2019 period is 8.6% per year.
The maturity period of SCSS is 5 years. After maturity one can extend the account for another three years.
Premature closure of SCSS is allowed after one year, but after the deduction of a certain percentage of the interest rates.
You can visit the post office and open Senior Citizen Saving Scheme.
This is one of the best investment plan for monthly income in India for senior citizen.
4) Tax-free Bonds from the stock market
The government tax free bonds are ideal for those investors who can lock-in their funds for a long tenure, say 10 to 20 years.
This long-term investment bears a very low risk. It pays interest either monthly, quarterly, half yearly or yearly depending on the option available in the tax free bonds.
As they are traded in the secondary market, they can be sold off anytime one wishes.
Currently there are no tax-free bonds in the primary market. There are several tax free bonds in the secondary market now where the yield works out to be up to 6%. If you are in the highest income tax bracket of 30%, investing in these tax free bonds is equivalent to pre-tax rate of 7.8% and post tax rate of 6%.
If you are in high income tax bracket of 30% and looking for a safe investment option along with monthly return, tax free bonds could be a good investment option for you.
5) Bank Fixed Deposits
Bank Fixed Deposits (FDs) have been one of the most conventional and popular sources of income via investment. It provides stable returns with low risk. One should research on the banks that provide good returns on FDs and invest in small-tenure FDs to ensure a regular income. If you are thinking which bank is best for monthly interest, you can check latest bank FD interest rates offer up to 8% per annum.
6) MIP Mutual Funds
If you are thinking which mutual fund is best for monthly income, then you should look at Monthly Income Mutual Funds. These MIP Mutual Funds aim to provide regular income, though not guaranteed.
Mutual Fund Monthly Income Plan (MIP) is ideal for those investors who can take moderate risk. A good tenure of this investment is between 3 to 5 years and one can receive a regular income by opting for the dividend payout option though not guaranteed.
The returns from such MIP mutual funds are between 6% to 9% per annum.
7) Investing in Stocks that are paying consistent Dividends
One can receive regular income by investing in those equity stocks that have the record of paying regular dividends. This investment option bears a high risk as it is subject to the volatility of the capital market. You are required to carry out a detailed study of the stocks and also build a diversified portfolio that includes shares from different sectors to ensure a high payout ratio. The dividends are paid out-of-profits and not on capital, so there are chances that the companies do not pay regular dividends.
Here are the sample stocks that are paying high dividends. You need to analyze whether these would meet your risk appetite and invest in them.
i) PTC India – Dividend payout is Rs 4 per share and CMP is Rs 58. Dividend works out to be 7.1%.
ii) Jagran Prakasan – Dividend payout is Rs 3.5 per share and CMP is Rs 54. Dividend works out to be 6.1%.
iii) Gateway Distriparks – Dividend payout is Rs 4.5 per share and CMP is Rs 90. Dividend works out to be 5%.
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8) Annuity plans
I am not that favorable for this option and this should be your last option if you have not opted any of the above plans for 100 reasons.
The annuity plans offered by insurance companies are the investment options that ensure regular monthly income with very low risk. This tool can be used as a retirement option to invest a lump sum amount and receive a fixed income. There are two types of annuity plans- Deferred annuity and Immediate annuity. Deferred annuity provides money after a set fixed period of time while Immediate annuity pays income as soon as you invest. The drawbacks of annuity plans are that it involves high commission and surrender fees and does not yield any tax benefit.
Conclusion: There is no 100% perfect plan if you are looking for a best investment plan to get monthly income. Pick-up the investment plan that is best suitable to your risk appetite and tenure for which you want to invest. One should not rely on a single investment to receive a regular flow of income. Plan your investment in a way that you invest your hard-earned money in a combination of two or three investments to ensure a healthy income every month and do not fall into financial crisis at any stage of life.
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Best Investment Plan for monthly income
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I live in a small village, I have no other income, but I would like to invest 10 lakhs rupees for regular income. I am 52 years old. I have small field for agriculture. Please suggest best plan for monthly income.
Nice article, These tips are really awesome, really like your post.
Everything is so much clearer with your tips in the article. keep going.
If you are ready to take some risk, Mutual funds are a great investment for you. It will not only help you to get regular income but experience with mutual funds will give you knowledge and confidence to move up to actual market investments with mutual funds.
What about secured NCDs which are also offering monthly/quaterly/yearly interest payout offers?
Hello Rajan, NCDs have turned HIGH RISK these days owing that several companies are defaulting interest payment and repayment of capital. If you are high risk investor, you can still consider Secured NCDs as one of the plan for monthly income
Till recently DHFL NCD and FDs were considered more safe with AAA ratings, but now DHFL has defaulted, better to be safe with FD in Banks in multiples of 5 lakhs in each bank which is insured. Interest less than 1 or 2 % in FD compared to NCD or Finance company FD but safety is assured as seen the way Yes bank was rescued by RBI
Agree Ashok. Also your comment about Rs 5 Lakhs FDs in multiple banks, the insurance amount is limited to max of Rs 5 Lakhs in all banks put together. I agree banks are now safer compared to companies where there is high risk
Sir, it is 5 lacs in all branches of one particular bank. Please check and correct me if I am wrong.
Hello Ramesh, sorry for the confusion. It is all deposits done in all branches of one particular bank (e.g. SBI). If you deposited in multiple banks and if particular bank goes bankrupt, Rs 5 Lakhs deposit insurance would apply for that bank. There are very less chances that all banks would go bankrupt.
Maximum limit for Senior citizen savings scheme is 15 lakhs and not 1.5 lakhs, Looks like a typo.
Sreejith, Thanks for your comment. I have corrected the same now. Pls send your postal address to firstname.lastname@example.org, would send a small gift for spotting this error.
I live abroad. Thanks for the offer though Suresh. Your blog is very informative. Good work as always.