Best Investment Plan For Monthly Income – Overview
‘Monthly Income Investment Scheme’ or ‘Monthly Income plan’ is a plan where an individual invests a lump sum amount and receives a part of the principal along with interest on a monthly basis for the number of years chosen.
Investing the surplus cash today to generate steady monthly income has become a very crucial step towards a financially secure future tomorrow. In this way an individual can multiply his money and make earnings out of it.
Let us further dive into it and understand ‘various monthly investment plans in India’ and how you can choose the ‘best monthly income scheme for yourself.’ Now that you are aware of Monthly income scheme, check this to know about best investment plan with high returns
List Of Monthly Income Investment Plan
While choosing the best investment plan for monthly income, it is very important to choose a trusted platform. Top 5 of those are
1. Fixed Deposit (with monthly payout)
Fixed deposit (FD) is a common and popular choice among investors. When an investment is made in fixed deposit, the money is locked in for the selected duration and interest is received on the same.
The investor has the option to choose to receive interest on a monthly basis. There is a fee involved when money is withdrawn before the maturity period. An investor can start with INR 1,000.
Interest rate for FD with monthly payout provided by some of the top banks are-
SBI Bank – 3.5% to 7.25%
HDFC Bank – 6.85% to 7.70%
ICICI Bank – 3% to 7.20%
*The interest rates depend on various factors like lumpsum investment or periodic investments. To know more kindly check with the banks/ financial institutions.
PROS – The interest rate is decided and guaranteed by the bank and that is why it is a reliable and a steady source of income. Senior citizens are given a higher interest rate comparatively.
CONS – The interest rate is lower when compared to a regular fixed deposit and it is usually lower than the market value.
You Should Invest In Fixed Deposit If You Are
- Looking for fixed returns per month
- Willing to receive low returns
2. Government Bond Funds
Government Bond Funds, issued by the federal or state Governments are relatively safe and a good choice when the risk taking capacity is low. They have a fixed maturity period that ranges from 5-40 years.
PROS – The bonds provide liquidity to purchase and sell in the financial markets, provide returns at a constant rate and carry low risk
CONS – The rate of return of Government bonds when compared to other investment options like equity, corporate bonds, real estate is significantly lower. Given the tenure for maturity which ranges from 5 to 40 years, the rate of returns may not be very appealing to investors
You Should Invest In Government Bonds If You Are
- Willing to invest for longer period
- A low risk taker
Check here if you want to know about best investment plan for 1 year
3. Mutual Funds
Monthly Income Plan (MIP) is a kind of Mutual Fund Investment that invests predominantly in debt and equity assets. By investing in a variety of debt and equity instruments, it is intended to preserve capital while generating cash flow. Systematic Withdrawal Plan (SWP) in Mutual Funds can enable an investor to withdraw a set amount on a monthly basis. There is flexibility in choosing the monthly payout amount and the total tenure.
PROS – An investor gets to choose the amount of investment, number of years and dates of monthly withdrawal. The investor can stop the SWP, can withdraw an amount exceeding the monthly limit and can also add further investment. The investor can be sure of receiving a fixed predetermined amount.
CONS – MIPs may not guarantee steady income and market downturn may impact monthly income. The withdrawal made through SWP may be subjected to taxation and could lead to tax liabilities thus reducing the overall returns. If an SIP is initiated during a market downturn, the investor may end up selling units at a lower price.
You Should Invest In Mutual Funds If You Are
- Looking for regular secondary source of income
- Looking to create your own pension
4. Annuity Plans
Annuity plans are provided by Indian Insurance firms. Annuity plans give a steady income at lesser risk. One of the main uses is to invest at a lump sum to generate income that can be used as a retirement plan. Annuity plans are divided into 2 categories- Deferred annuity and Immediate Annuity.
They are categorized based on the payout period. Immediate annuity allows for receiving regular income as soon as the lump sum is paid. It then guarantees regular payouts. Deferred Annuity involves building a corpus first which is then used to buy annuity at the time of retirement. Deferred annuity plans provide money after a fixed period is specified.
PROS – Annuity plans offer a sense of security and gives the investor an assurance of receiving guaranteed payouts. They also carry no investment caps.
CONS – Annuity plans carry fees like commission and surrender charges. They do not provide tax benefits. The return rate offered is around 4-6 % and hence is not very attractive. Also, annuities cannot be withdrawn prematurely.
You Should Invest In Annuity Plans If You Are
- Looking for fixed source of regular monthly income
- A low risk taker
5. Post Office Monthly Income Scheme
The Post Office Monthly Income Scheme (POMIS) is a Government backed scheme and is regulated by the Department of Post (DoP), Indian Post. The POMIS interest rate for the current fiscal quarter is 7.40% p.a. payable monthly. The investment amount ranges from INR 1,000 to INR 9,00,00 for single account and the maximum limit for joint account is INR 15,00,000. The lock in period is 5 years.
PROS- It is a reliable scheme and generates a steady income. It can be started with a nominal amount of INR 1,000
CONS– There are certain consequences on premature withdrawal. If the amount is withdrawn
Between 1st and 3rd year- Entire deposit is refunded with 2% penalty
Between 3rd and 5th year- Entire deposit is refunded with 1% penalty
You Should Invest In POMIS If You Are
- A low risk taker
- Willing to keep the deposit until maturity.
If you want to invest for a longer period of time, check out best investment plan for 5 years
Features Of Monthly Income Investment Scheme (MIIS)
- Diverse Investment Options – Monthly Income Investment Scheme provides an investor a wide range of investment options. Depending on the risk tolerance and financial objectives of the investor, an investor can choose the best investment option.
- Capital Preservation – By investing in relatively low-risk assets, some MIIS place a priority on capital preservation. The investments are made with a goal to produce consistent returns while reducing the risk of substantial financial loss.
- Liquidity – Monthly Income Investment Scheme gives the investor the flexibility to withdraw the deposited amount under certain circumstances and also liquidate their investment in the financial market. However, exact liquidity conditions and limitations may change based on the chosen investment strategy and plan.
- Risk and Reward- MIIS has investment plans for both high risk taking investors as well as low risk taking investors. The rewards are in accordance with the risk the investment carries. Therefore it becomes important for an investor to thoroughly evaluate the risk-return profile of each scheme.
Benefits Of Investing In Monthly Income Investment Scheme (MIIS)
- Flexible Investment Amounts – Usually the investments start with a nominal amount of INR 1000 and do not carry a higher limit. It enables the investor to make a choice as per his need and capacity.
- Regular Income – MIIS can ensure regular flow of income. To lower risk, MIIS also provides options on diversifying the investment portfolio. This diversification can be attained through making investments in Mutual Funds, Government bonds, Fixed Deposits, RRITs, POMIS across a variety of industries, regions, and asset types.
- Consistent Returns – The investors are assured to earn a consistent and predictable stream of monthly income according to the chosen investment plan.
- Convenience – Investing in MIIS can offer convenience as investors do not need to actively manage their investments nor make frequent decisions. The choice of investment platform, tenure of investment, investment amount are some of the crucial decisions needed to be taken by the investor before investing.
Do you know you can also lend money and earn high returns on it?
Factors To Consider Before Choosing Monthly Income Investment Scheme
- Both short term and long-term financial goals must be considered before choosing the right scheme.
- Risk taking capability must be taken into consideration before choosing an appropriate investment option and monthly returns.
- Liquidity options must be determined before making an investment decision to make sure you have access to funds when needed.
- Determine your investment horizon and align it with the maturity period of the chosen monthly income plan.
- The monthly payout option, reputation of investment platform, scope of income generation, tax benefits are some of the factors to be considered when choosing an investment platform with monthly returns
Alternate Investment Options
Peer To Peer Lending – Peer to Peer lending, also known as P2P Lending or Social Lending, connects investors and borrowers through an online platform without the need for an intermediary or financial institution. The borrowers, who may have difficulty obtaining loans from traditional lenders due to low credit score, can get quick loans without the need for heavy documentation. The borrowers have the flexibility to choose the loan terms like amount and repayment periods according to their needs. The investors on the other hand get attractive interest rates of about 10-12% per annum. Peer 2 Peer Lending Platforms also provides investors with control over their investment decisions.
One of the best p2p lending platforms in India is LenDenClub (India’s largest p2p platform) which has catered to 85 lakh+ customers and has INR 11000 Cr+ invested till date. To know more, visit the website https://www.lendenclub.com/
Conclusion
When seeking the best investment with monthly returns, it is important to consider financial goals, risk tolerance, liquidity options, consider risk and return. It is also important to remember the age-old rule, ‘Don’t put all your eggs in one basket’ and try to diversify your investment portfolio. It is also important to review tax implications of various investment choices. It is also important to keep a close eye on your investment portfolio and monitor its performance regularly.
The choice of best investment with monthly return will depend on your unique financial circumstances and preferences, risk tolerance, portfolio diversification. You should remember to conduct thorough research, seek professional advice and stay informed about market performance to make sound investment decisions.