If you have a considerable disposable amount in your hands, then investing it in schemes that offer regular monthly income is a great idea. This ensures that your idle money starts paying out dividends or earns profits.
Post Office Monthly Income Scheme (POMIS) is an investment offered by India Post. It is an excellent investment option for risk-averse investors who are looking for constant regular income as it enjoys government-backing. The POMIS is currently offering interest at the rate of 6.6% per annum, payable monthly. This scheme comes with a deposit tenure of five years. An individual can invest a maximum of Rs 4,50,000, and this limit is doubled to Rs 9,00,000 for joint accounts. You can start investing as low as Rs 1,500 in this scheme. Once the POMIS investment matures, the same can be reinvested for another set of five years.
Government bonds are an excellent low-risk investment option for risk-averse investors. The duration of these bonds ranges from 5 years to 40 years. Government bonds pay out regular interest or offer coupon payments as fixed by the Government of India. Government bonds come with a predefined maturity date. The main intention of issuing government bonds is to raise capital for government expenditure.
Many non-banking financial companies (NBFCs) and housing finance companies (HFCs) offer corporate deposits. These are similar to bank deposits, but the only difference is that you invest with a corporate entity, which is not as secure as a bank deposit. Corporate deposits offer a high interest rate and come with an added flexibility, which bank deposits don’t offer. Before making investments in corporate deposits, you must check for the financial strength and credibility of the NBFC. For this, you can make use of the CRISIL ratings.
Monthly income plans (MIPs) are mutual funds that invest mainly in fixed income and a small portion in equity and equity-related instruments. The fund houses payout their investors with a steady income, regularly. This amount is not fixed and depends on the performance of the fund. As the mutual fund performance drives the returns, it is not guaranteed. Also, there are possibilities of negative returns as well. Hence, before deciding to invest in a monthly income plan, you must consider your risk profile. You can opt for the growth or the dividend option of monthly income plans. However, the MIP declares dividends only if there are profits.
If you are a senior citizen, then a senior citizen savings scheme (SCSS) is a great investment option. It enjoys sovereign-backing and only senior citizens (above the age of 60 years) are eligible to invest in the scheme. You can avail of this scheme at notified bank branches and post offices. You must subscribe to the scheme within one month after retiring. You have SCSS offering an interest rate of 7.4% per year, payable quarterly. It has a tenure of five years. You can invest a maximum amount of Rs 15 lakh in the SCSS. However, the interest from the scheme is added to taxable income and taxed as per your income tax bracket.
PMVVY is an insurance policy-cum-pension scheme that provides security to senior citizens. This pension plan is provided by Life Insurance Corporation (LIC) which caters to one's need for post-retirement financial planning. It involves Direct Benefit Transfer (DBT) for Social Security & Pensioners.
It provides senior citizens a stable income with interest rates around 8%. It has a policy term of 10 years as per the payment mode chosen by the pensioner. The annuity is paid on monthly, quarterly, half yearly or annual basis after the policy term is over.
Each investor is unique with the amount they have for investment, risk tolerance, return expectation and holding period planned. Some invest capital in lump sum while some invest in regular intervals through SIPs or Systematic Investment Plans.
There are many tools and facilities extended by fund houses to meet the return income expectations of different types of investors. One such facility is a Systematic Withdrawal Plan (SWP), where investors receive regular payouts from their invested capital.
These are life insurance policies that provide investor with an option to receive a predetermined monthly payout once the maturity period has passed. Such life insurance schemes combined with savings is an excellent method to guarantee your family's future while also maintaining financial stability when you retire.
There may be several investment options that offer monthly income, but the ones mentioned above are some of the best around. It will help if you choose plans that suit your risk profile and investment objectives.