Best Investment Plans To Earn Regular Monthly Income in India

Imagine having a steady stream of income flowing into your bank account every month without worrying about market fluctuations. Yes, even in today’s inflationary environment, you can find investment avenues that can help you stay ahead of the curve. If you want to know more, read on. In this article, we'll dive deep into the world of monthly income investments, unveiling the best options that can give you steady returns.

Monthly income schemes are financial products that enable you to earn a regular income on your investments. These products are usually a combination of fixed-income securities, such as deposits, bonds, debentures treasuries, and equities. The true value of MIPs is in their flexibility, allowing investors to choose from a variety of options based on goals, risk tolerance, investment horizon, and more.Also read: Types of Investments Options in India

Long Term Government Bonds

Long-term government bonds are a type of debt securities issued by the central or state government with extended maturity periods, often exceeding 10 years. These are sovereign-backed debt instruments which are largely popular among investors seeking stable, albeit low-risk returns.Like a debt security, the government bond promises to pay a fixed interest income on the face value of the bond, along with the repayment of the principal on maturity. Today a slew of government bonds are available where small investors can also park their money.

Investment Limit

There is no specific limit for investing in government bonds, making them accessible to a wide variety of investors. Since the return is low, one should examine their long-term investment goals before investing. A small corpus invested in government securities assists with portfolio diversification and adds stability.

Interest rate:

The interest rate of the government bond depends on the specific bonds and is subject to regulatory and policy changes.

Tenure

These are fixed-tenure investment schemes. The average maturity of government bonds is 10 years.

Initial investment amount:

Investing in government securities doesn’t require a substantial amount. The minimum investment requirement is ₹1000.

Life Insurance Savings Plan

Life insurance policies are widely recognised for providing death benefits. However, there's another dimension to life insurance which provides you an investment or savings component. These are called Life Insurance Savings Plans and here’s how they work. If the policyholder passes away during the policy period, the insurer pays the agreed-upon life cover amount to the nominated beneficiary. However, if the policyholder lives through the policy's term, they receive a maturity benefit. This benefit includes all the premiums paid plus any additional bonuses and loyalty additions.

Investment limit:

There are no specific limits to investing in a life insurance savings plan.

Interest rate:

The rate of return depends on the specific plan and overall market performance.Typically, the rate of returns varies between 5%-20% over 10 years.

Tenure:

Usually, life coverages are available for 5-40 years tenure. However, the actual period of insurance is directly proportional to the age of the insured.

Initial investment amount:

The life insurance premium is a combination of various factors such as the age of the insured, coverage required, medical conditions, and riders included. Also, the premium amount varies between the insurance companies. Also read: Beginners Guide To Invest Money

Equity Share Dividends

A dividend is a share of a company’s profit distributed among its investors. Companies that pay regular dividends are usually stable and have healthy financials, which allow them to generate continuous profit. These dividends offer you a steady stream of monthly income by distributing a portion of a company's profits to its investors regularly.

Investment limit:

Investing in equity investment is the same as share market investment. There is no general applicable limit on investing in companies.

Interest rate:

The percentage of dividends is decided by the board of directors, which may vary from company to company.

Tenure:

Dividend shares are typically considered for accumulating wealth over time. Investors often hold these shares for decades for potential dividend income and capital appreciation.

Initial investment amount:

There is no fixed initial investment value.

Post Office Monthly Schemes

Most of us are already familiar with the India Post, the government-operated postal system in the country. But besides delivering our post, the post office also offers a slew of savings schemes. One such plan is the Post Office Monthly Income Scheme , which is an investment product backed by the Government of India. Investments made in the POMIS are routed largely to government debt securities. Since they carry a sovereign tag, POMIS is generally considered a low-risk avenue for investment. Here are some of its key features.

Investment Limit:

As per the 2023-2024 budget, a single account can invest up to ₹ 9 lakh per annum in POMIS schemes. Additionally, investments of up to ₹ 15 lakh per annum can be made for joint accounts.

Interest rate:

The POMIS interest rate at the time of writing is 7.4%.

Tenure:

The lock-in period is 5 years. After this period, you can either withdraw your funds or choose to reinvest them.

Initial investment amount:

The POMIS does not require a substantial amount of capital to get started. You can start with as low as ₹ 1000. Also read: 4 Reasons Why Goal-Based Investing is Important

Senior Citizens Savings Scheme

The provide seniors with a regular stream of income post their retirement, the government launched the Senior Citizens Savings Scheme in 2004. Nearly 20 years down the line, the SCSS is still one of the most popular investment products for Senior Citizens seeking a regular income stream. SCSS invests its corpus primarily in government debt securities, which means that your principal amount invested is secure, and you receive guaranteed returns. What’s more, your investment in SCSS carries tax benefits, making it a tax-efficient option. You can invest in SCSS through your bank or Post Offices across India.

Investment limit:

The maximum investment limit is ₹ 15 lakh per individual.

Interest rate:

The interest rate is set by the government based on prevailing market rates. The rates are typically higher than other fixed-income options.

Tenure:

The SCSS has a maturity period of 5 years, which can be extended for an additional 3 years.

Initial investment:

There is no specific minimum initial investment mentioned, but it should be equal to or more than ₹ 1,000.

Annuity Plans

Insurance products have evolved over the years and today you can get plans that offer you regular income. These are called annuity plans and are a great option for retired individuals. Simply put, an annuity is a contract between you and an insurer or financial institution, whereby you pay a lump sum amount in exchange for regular monthly payments with accrued interest. The products are further fragmented into three different types – fixed annuities, variable annuities, and indexed annuities. The monthly payout is contingent on the type of plan you choose, along with factors such as your age and interest rate. Annuity plans are independent financial products, which means that you do not need to have an existing insurance policy to buy these plans. However, some types of annuity plans are linked with stock market returns, so your returns may vary from month to month.

Investment limit:

Annuity plans require a lump-sum premium payment, and there may not be a specific investment limit.

Interest rate:

Annuity plans provide periodic payments, and the interest rate or annuity rate depends on the insurance company and the specific plan.

Tenure:

Annuity plans can be for a fixed term or provide lifelong payments.

Initial investment:

The initial investment amount depends on the premium chosen by the policyholder. Also read: Fixed Income: Falling Interest Rates? Ways To Reduce Reinvestment Risks

Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana is a rather unique product that combines elements of pension schemes and insurance. Introduced by the Life Insurance Corporation of India in 2017, the PMVVY scheme caters exclusively to retired individuals aged 60 and above by offering them a fixed guaranteed income every month in exchange for a lump sum payment (usually a single premium). The policy terms last for 10 years, during which you receive fixed pension payments based on the purchase price, pension payment frequency, and pension rate, as defined by the scheme. Its insurance element comes in the form of a death benefit, whereby you are entitled to the purchase price in case of an unfortunate demise. Additionally, you are entitled to maturity benefits and can also avail a loan against your policy if needed.

Investment limit:

The maximum investment limit is ₹ 15 lakh per individual.

Interest rate:

The interest rate is determined and periodically revised by the government.

Tenure:

The PMVVY has a tenure of 10 years.

Initial Investment:

The minimum purchase price for PMVVY is ₹ 1,56,658 for a monthly pension of ₹ 1,000. Also read: Which Is Better Between Pradhan Mantri Vaya Vandana Yojana (Pmvvy) And Senior Citizen Savings Scheme (Scss)?

Systematic Withdrawal Plans (SWP)

Mutual funds are a great way to grow your investments in line with stock market returns. However, since the returns tend to fluctuate, you will need to oversee your investments from time to time. You may even be tempted to withdraw your investments in case the market stays consistently in the red or doesn’t generate the returns you are looking for. To avoid these hassles, you can opt for something called a Systematic Withdrawal Plan . These plans offer you the opportunity to cash out a certain amount of your mutual fund investment every month, allowing you to receive fixed monthly payments. For example, let’s assume you have invested ₹ 1,00,000 in mutual funds and have set up a SWP of ₹ 2,000 every month. Every month, the mutual fund will automatically deposit ₹ 2,000 in your account and reduce it from your investment. Your balance amount in the mutual fund will continue to generate returns. However, keep in mind that if the fund’s performance is poor, the value of your investments may decrease over time, in which case you may need to adjust your monthly withdrawal amounts accordingly.

Investment Limit:

SWP is a withdrawal strategy from existing investments like mutual funds, so there's no specific investment limit.

Interest Rate:

SWP returns depend on the performance of the underlying investment.

Tenure:

SWP allows you to choose how much and how often you want to withdraw from your investments.

Initial Investment:

There’s no fixed initial investment. Also read: 5 Investment Options For The First Time Investor

Corporate Fixed Deposits

One of the more traditional and straightforward ways to earn regular monthly income is through bank fixed deposits. However, the same has not always been popular if you are looking to beat the inflation rate. Bank FD rates, especially post-tax, are typically well below the rate of inflation. In other words, locking your money in bank FDs can erode the value of your investment over time. Corporate FDs have emerged as an alternative to bank FDs for those who may be willing to take more risk for greater returns. Corporate FDs are structured like bank FDs but are offered by non-banking institutions. This means that they carry a higher degree of risk than banks. However, corporate FDs offer higher rates of interest, ranging between 8% and 10%. Overall, corporate FDs are a good option for those who have a higher risk appetite and are seeking higher returns.

Investment Limit:

Corporate FDs typically have no specific maximum investment limit.

Interest Rate:

The interest rates on corporate FDs can vary widely among different companies.

Tenure:

Corporate FDs offer various tenure options, typically ranging from a few months to several years.

Initial Investment:

The minimum initial investment amount can vary among different companies.

Monthly Income Plan (MIP)

Another type of product tied to mutual funds is called a Monthly Income Plan. It is a type of mutual fund that pools your investment into a basket of different debt and equity products. Fund managers are responsible for overseeing your investments and ensuring that you receive returns from your investments at regular intervals. These returns can also come in the form of dividends, which are distributed to the investors.

Investment Limit:

MIPs generally do not have specific maximum investment limits. Investors can typically invest as per their financial capacity.

Interest Rate:

The returns from MIPs depend on the performance of the underlying debt and equity securities in the fund's portfolio. There is no fixed interest rate.

Tenure:

MIPs are open-ended mutual fund schemes, which means there is no fixed tenure. Investors can stay invested for as long as they wish.

Initial Investment:

The minimum initial investment amount for MIPs can vary among different mutual fund companies and schemes. It can typically range from a few thousand rupees to lakhs.Also read: Your Money: Investment Tips For Those Opting For The New Tax Regime Here is a summary of all the options you have on your table.

• Monthly income plans offer a consistent cash flow, ensuring your financial stability.• Diversifying your investments among different MIPs can reduce risk and enhance returns.• Many MIPs guarantee your initial investment amount, providing peace of mind.• Certain MIPs offer tax deductions under Section 80C , reducing your tax liability.• Monthly Income Schemes encourage disciplined savings and help in long-term wealth creation.• Some MIPs offer easy withdrawal options, ensuring access to your funds when needed. Also read: Received Your Year-End Bonus? Here’s the Smartest Investment You Can Make

• Senior citizens looking for a regular source of income during retirement are ideal candidates for monthly income schemes.
• Those seeking supplementary income to meet expenses or save for future goals.
• People who prefer steady returns over high-risk, high-reward investments can find options such as POMIS and Annuity Plans to be extremely attractive.
• Those interested in wealth creation with the assurance of regular income.

Pay heed to your risk tolerance

Your risk tolerance has a direct impact on your choice of investment. If you are burdened by major expenses and don’t want to take major risks with your savings, safe options like FDs or SCSS may be more suited to your needs.

Assess your financial objectives

Are you looking for a steady income post-retirement or merely a way to supplement your income? Is tax-saving important to you? Are you risk-averse or willing to take risks? Assessing your financial goals and objectives will help you zero in on the right MIP.

Do your market research

Doing your due diligence not only involves assessing your personal goals but also factoring in market risk. This accounts for stock market performance, inflation, and other factors that might erode your purchasing power. Should the market be in a rut, you may want to avoid equity mutual funds and look for a safe monthly plan like the Post Office Monthly Income Scheme.

Analyse your liquidity needs

Finally, understand your liquidity needs. Fixed deposits, for instance, may not allow you to prematurely withdraw your funds without incurring a penalty. Also read: How Much Investment Risk To Take

Investing in monthly income schemes in India is a smart financial move for those who value a regular income stream, capital protection, and the possibility of long-term wealth creation. With a plethora of options available at your disposal, all you need to do is put in some time and research to figure out which one is tailored to your needs.