Where to invest money for regular monthly income?
Do you need an investment strategy which will generate monthly or yearly income to take care of extra expenses? Sometimes, salary is not enough to take care of monthly expenses. So, you may need to look for some other investment option which will give you monthly income along with salary. This alternative income is known as passive income.
Income investing is an investment strategy which is designed to generate regular, say monthly or yearly, income. Income investing is a good option after retirement as you need some income source after retirement. You need some entity which pay you at interval of time to fulfil day to day expenses after retirement.
Generally, in India, people invest for growing money. Income investing may not give fast growth. It gives you a steady income. You receive monthly income in the form of interest or dividend.
For example, if your salary is Rs 80,000 and your monthly expenses are more than Rs 80,000 then you may think of earning more monthly income by doing some sort of investment. So, return on your investment will only act like extra income for you. Generally, people think of income investing after retirement.
Difference between growth investing and income investing
| Growth Investing | Income Investing |
| Gives high return | Gives low return |
| Return is virtual till you book the profit | Return is real as it comes in your bank a/c |
| Return is a goal | Stable income is a goal |
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What are the benefits of Income Investing?
- First of all, it gives you alternative income which may help you to fund your expenses or you can use this income to plan a holiday or to buy a car if you opt for yearly return.
- In growth investing, you invest your money to grow your capital but you can see your money growing virtually until you sell your investment and book the profit. In income investing, you receive real return every month or year in your bank account.
- You receive consistent return from your income investing.
You can invest money in growth investing (like equity or equity mutual funds), let money grow and book the profit. With this profit earned, you can buy income investing schemes and have alternative income.
Read also: A Beginners Guide to Systematic Investment Plan
What are the investments options which give Monthly Income?
Following are the options which give idea how to earn monthly or yearly income:
| Rental Income | If you own a property, you can give it on rent. You can earn well by renting a property. You can buy a property on loan and pay EMIs through income received from rent and in few years. But, maintenance for the property needed to be paid. |
| ETFs | Exchange-traded Funds (ETFs) can pay all kinds of dividends and stand as some of the most straightforward ways of setting investors up with a form of passive income on a regular basis. |
| Fixed Deposits(FD) | Fixed Deposits are provided by banks, Non-Banking Finance Companies (NBFCs). You get higher interest in FD than saving bank account. You receive around 6% interest and around 7% to 8% interest for senior citizens. |
| Post Office Monthly Income Scheme(POMIS) | If your risk tolerance is zero then POMIS is a good option. You get around 7% to 8% interest per annum. Maturity of POMIS is 5 years. |
| Mutual Fund Monthly Income Plan | Monthly income plans(MIP) is a good plan for senior citizen as well and MIPs are normally debt oriented hybrid mutual funds which invest in safe government debt but pay out the gains on a monthly basis. This is a good option when you can take risk. MIP Ration of investment is 20% to 30% in equity market and 70% to 80% in debt market. You can receive monthly income by selecting a dividend pay-out option. |
| Equity | Risk factor is very high. You need to invest in multiple stocks so risk is reduced. |
| Annuity | Indian Insurance companies offer low risk and regular income. You have to make investment by lumpsum payment or series of payment. You can receive regular income immediately or at some point in future. |
| Government Bond | Bond is a debt type of investment. Government or bank or corporate borrows money for specific time at a fixed interest rate by issuing bonds. Central or State Government issues bonds under supervision of Reserve Bank of India. The interest rate offered is known as coupon rate. |
| Senior Citizen Saving Scheme | Post office provide a scheme for senior citizen (60 years and above). This scheme is considered to be risk free investment and it gives near about 7.4 % interest rate on saving. |
You can create a portfolio by investing in different schemes. Choice is dependent on your risk capacity and a goal (purpose and how much do you need?)
Example, XYZ person earns Rs 50,000 per month but wants more monthly income, Rs 20000 to fulfil increased expenses. So, he would create a portfolio by investing in different schemes which would generate income to release him from burden of extra expenses. But, again it depends on his choice of investments in portfolio and his risk capacity and amount in hand to be invested.
Also Read: POST OFFICE SAVING SCHEMES
Takeaway:
We read about best investment plans which give us idea how to generate monthly income. Investing for monthly income is practical investment option for senior citizen as they have limited source of income. But, in toady’s world where everyone wants to live a specific lifestyle like eating out once in a week, holiday once in an year, send children to best schools and coaching classes, etc and you need extra money to fulfil these needs. So, earning salary and monthly income by investing in right option can fulfil your and family members expenses.
There are several monthly income plans available in market, investor has to decide his needs and requirement before planning investment plan for monthly income. b4investing can help
