Rising cost of living warrants making investments in prudent financial instruments to generate monthly income on top of your regular income to take care of extra expenses. There are many financial instruments on the market that provide you with a monthly income to take care of your short-term needs and augment your monthly income.
Here are some investment options which you can contemplate to generate monthly income on a regular basis:
Fixed deposit (FD)
For long, FDs have been the de-facto investment choice for a majority of Indians because of their ability to generate assured and fixed returns, irrespective of market performance. FDs, being latent to market volatility, ensure your corpus doesn’t dip in case the markets turn sour.
Though FD interest rates have fallen of late, FDs offered by non-banking financial companies (NBFCs) offer higher returns. For instance, NBFCs Fixed Deposit gives you a return of 8.4% on your investment. If you are a senior citizen, you can earn an extra interest rate of 0.35% over regular rates.
Also, it gives you the flexibility to receive interest on a monthly basis to suit your liquidity requirements. You can figure out the maturity amount and the interest payable with this FD calculator.
Post office monthly MIS
Post office monthly income scheme (MIS) is another prudent investment option to generate monthly income. The rate of interest on this scheme is over 7% and the interest is paid on a monthly basis commencing from the date of deposit.
For an individual account, the maximum limit of investment is Rs.4.5 lakh while for a joint account it is Rs.9 lakh. With a maturity period of 5 years, the post office MIS is a safe and low-risk investment avenue for obtaining monthly income. You can opt for this scheme in the post office of your area by submitting the relevant documents.
New-age Indian investors have taken mutual funds in a big way to accumulate wealth for essential long-term life goals such as higher education of children, marriage and retirement. While systematic investment planning (SIP) allows you to invest small amounts in mutual funds on a regular basis, systematic withdrawal plans (SWPs) allow you to earn regular income on a monthly basis.
Under an SWP plan, you need to specify a certain amount for monthly payouts. On the date mentioned, the fund house will redeem the units equaling the said amount and the same will be credited into your account. Though several funds offer dividend option, note that dividends are not guaranteed as they depend on the market performance of a fund.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
An ideal investment plan for senior citizens, PMVYY offers a lucrative interest rate of over 8%. Operated by the Life Insurance Corporation of India (LIC), PMVYY offers assured monthly returns for a period of 10 years. In the recently tabled Union Budget, the investment limit under PMVYY has been increased to Rs.15 lakh from the earlier Rs.7.5 lakh.
So, if you are a senior citizen investing Rs.7.5 lakh under the scheme you get a monthly payout of Rs.5,000 for 10 years. On the other hand, if you invest Rs.10 lakh, you receive a monthly payment of Rs.10,000 for 10 years. The scheme also offers you the option to choose the pay-out on a quarterly, half-yearly, or yearly basis.
Remaining invested and making money work for you requires financial discipline and a sound knowledge of various financial instruments aligning with your life goals, risk-appetite and investment horizon.