Having a certain amount of income every month is very much necessary for all individuals as it assures some level of financial security.
If you are left with a significant disposable amount of money after a property deal or even after your retirement, it is always better to go for an investment plan. Mostly after retiring people get a fear of running out of their savings as they no longer have a fixed source of income. In such cases, investment plans for monthly income are the best option to secure your money.
When you invest your money in such investment plans, they provide you with a certain amount of money every month as interest on your invested amount. This amount can be used as your monthly income to cover your day to day expenses while also securing your savings.
Why do you need an investment plan for monthly income?
Many times, we are met with uncertain situations in our life. Losing a job, not landing a job soon enough after quitting one, lifestyle costs increasing due to children, and many more. In these situations all we have to rely on are our savings. But as you know, savings can’t always be enough to help you deal with all of your expenses. Therefore it is always better to invest the money you have saved in an investment plan which will help you get monthly income.
In addition to that many retired individuals have the fear that their savings may run out soon and they won’t be able to maintain a financially secure life because of the lack of regular income. This is where investment plans for regular monthly income come into play.
These plans give you monthly returns that act as your monthly income which you can use for your regular expenses while maintaining your financial security.
Best investment plans for monthly income
Let’s go through some of the best investment plans for a monthly income-
Mutual funds can be the best investment plan for monthly income in India due to their potential for steady growth and diversification. Investors can benefit from professional management by experienced fund managers who make informed decisions to maximize returns. Additionally, mutual funds are an affordable option, allowing investors to start with a small amount and gradually build their investment.
They also offer liquidity, as investors can easily redeem their investments when needed. Some mutual funds even provide tax benefits, reducing the tax burden on earnings, further enhancing the attractiveness of this investment option. However, it’s essential for investors to conduct thorough research, assess their risk tolerance, and consider their financial goals before investing. Consulting a financial advisor can also provide personalized guidance in choosing the best-suited mutual funds for monthly income needs.
Fixed deposits can be a good investment plan for monthly income in India due to their reliability and predictable returns. Investors deposit a lump sum amount with a bank or financial institution for a fixed period at a predetermined interest rate. Upon maturity, the principal amount along with interest is returned to the investor, providing a steady monthly income. Fixed deposits offer capital preservation, low risk, and ease of investment. However, the returns might be lower compared to other investment options, and premature withdrawals could result in penalties. It is ideal for conservative investors seeking stable income without market fluctuations.
Post Office Monthly Income Scheme
If you desire to invest in a scheme with zero risk, then Post Office Monthly Income is the safest option for you. This investment scheme is offered by India Post. This investment scheme is backed by the government and hence is a perfect option for the investors who have a low-risk appetite.
The post office monthly income scheme has a maturity period of five years with an interest rate of about 6.6% per annum. The investment can be done with a starting amount as low as Rs 1,500 with the maximum amount being 4.5 lakh rupees.
Even though the maturity period is five years, the money can be withdrawn anytime between 1 to 5 years. However, withdrawing the money before the maturity period will lead to a deduction of about 1 to 2 %.
Investing in stocks can be a good option for generating monthly income in India, but it comes with higher risks and requires a more active approach compared to fixed deposits. Here’s how stocks can be an investment plan for monthly income:
- Dividends: Some companies pay dividends to their shareholders regularly, providing a source of monthly income. Dividends are a portion of the company’s profits distributed to investors.
- Trading Strategies: Active investors can implement trading strategies, such as covered call writing or dividend capture, to generate regular income from stocks.
- Capital Appreciation: Apart from dividends, stocks can also appreciate in value over time, allowing investors to sell some shares periodically to generate income.
- Risk and Volatility: Stocks carry higher risks due to market fluctuations, which can impact the value of your investments.
- Research and Monitoring: Successful stock investing requires thorough research and continuous monitoring of the market and individual companies.
- Diversification: To reduce risk, investors should diversify their stock portfolio across different sectors and industries.
NBFC Deposits or Corporate Fixed Deposits
Similar to bank deposits, corporate companies like NBFCs or Non-banking financial companies also offer fixed deposits with higher interest rates. These deposits are usually referred to as corporate deposits.
As opposed to investing in a bank, you have to invest your money in a corporate firm. These companies will provide you with quarterly or half-yearly interest which are higher than those provided by the bank on your deposits. However, as compared to bank deposits, this investment can be a bit risky and you have to be very careful while choosing the right company to invest in.
It is advised to go for a company with high credibility and good financial strength.
Senior Citizen Saving Scheme
The Senior Citizen Saving Scheme is a good option for those who are worried about post-retirement income. This scheme offers about 7.4% of interest per annum. Anyone above 60 years of age is eligible to make an investment through this scheme.
This again is a risk free scheme with a tenure of 5 years and maximum investable amount of about 15 lakhs. You need to enter this scheme a month prior to your retirement. The one thing to consider is that the income through this scheme is taxable as your monthly income.
Government bonds are the best kind of investment options for the investors who have a low risk appetite. These bonds come with a lock in period that ranges from five to forty years. These are a great option to get maximum returns with low risk. You can also pair them with other investments to attain maximum financial security.
Monthly Income Plan or MIPs
Mutual funds that invest in fixed deposits fall under this category. Monthly income plans are another good option for investment but they come with a moderate risk. The risk here lies with the fund’s performance. As opposed to other schemes, where you get a fixed amount of returns, the amount of returns through MIPs will depend on how well the fund has performed in the market, which might vary from time to time. This also makes your scheme liable to negative returns.
Therefore, with MIPs you will have to analyse the fund you plan to invest in and assess your risk profile like you do for any other mutual fund scheme.
Annuity plans are a great investment option again for post-retirement security. You can invest in a lump sum to earn regular income. Many insurance companies offer annuity plans. However, there are few things to be considered before investing in annuity plans.
Annuity plans involve commission and surrender fees and they also do not provide any tax benefits.
How do I choose the best investment plan for Monthly Income that is right for me?
Now that we have discussed some of the best investment plans for monthly income, you must wonder which one is the right one for you? Well choosing the best plan is relative to what your financial goals and your risk-taking appetite are.
As mentioned above, if you choose to have low to no risk, schemes like government bonds and post office monthly income plans are the best. However, if you are not afraid to take a little risk then MIPs may prove to be a great option and so would corporate deposits, as both these schemes provide higher returns.
Senior citizen saving schemes and annuity plans are both great options for post-retirement financial security and income. Senior citizen saving scheme being the safest.
Among various investment plans available in the market we have listed a few that are considered to be the best ones for a monthly income. As to which one is the right one for you will depend on your risk appetite and goals.
- What is the best investment plan for monthly income?
All the plans stated above— Post office monthly income scheme, Senior citizen saving scheme, NBFC deposits, MIPs, Annuity plan and government bonds are great options of investment for monthly income.
- Which are the safest investment plans to gain income?
The investment plans backed by the government like the senior citizen saving scheme are usually the safest.
- How are corporate deposits different from bank deposits?
Through corporate deposits you invest in finance companies rather than banks and the companies offer you returns.