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2020 Best Monthly Income Investment Schemes. Types and features of Monthly income plans

 Best Monthly Income Investment Schemes


Nowadays everyone is planning to invest money and creating wealth. There are many ways for generating monthly income from investment products depending upon the tenure and returns.  

The monthly income schemes are more beneficial for people aged above 50, senior citizens, and for those who are looking for a passive side income if you are having an extra lump sum amount.

The article explains various monthly income schemes that can help to create an extra income.

You need to divide the investment products such as FD, saving account, Post office monthly scheme into different goals, or usage-based on time duration.

Factors to select the monthly income plans

Risk appetite- you need to check the risk associated with the investment products. It will be low, medium, and high risk. FD and POMIS are the safe investment products.  The liquid mutual funds are low risk.  You need to check according to your risk appetite.  

Tenure – the next thing is the duration of time in investment products. While there are investment products such as POMIS and SCSS are locked for 5 years. The FDs range from 1 month to 10 years. You can select the different investment schemes based on your goals (Short- term and Long-term goals) and needs.

Returns – There are fixed returns for FD, POMIS, SCSS while returns are not fixed in mutual funds. For generating guaranteed returns, you can invest in fixed deposits as they are locked in for the duration of deposit tenure.

Taxation- you need to check the investment product tax benefits as it helps to increase your monthly income.

Who would be requiring monthly income schemes?

The MIS is for the individuals in the Retired individuals or senior citizens who are looking for regular monthly income for their expenses.

It can be also benefited those who want to invest a Lump sum amount and receiving the passive income for their expenses. It can be used for investing in SIP or RD to create wealth.

Types of Monthly Income Schemes

  • Fixed Deposit

A fixed deposit is a type of term deposit and secure investment that is offered by banks and financial institutions.it will be fetching a fixed interest rate over a time. It is the safest investment offering good returns. Fixed Deposit can be used to created monthly income and protecting the capital amount.

The Interest rates of FD are at around 5 to 7 % depending upon the duration. The Interest rates for senior citizens are higher than the regular FD (0.2-0.5 %) for different banks. The monthly interest earned is automatically credited to the savings account.

The TDS of 10 % will be deducted if the interest is more than Rs 40,000 in a particular financial year. Also, the interest earned from fixed deposit is taxable according to the slab.

The interest rates of FDs are different based on duration so plan according to the duration if you are looking for long term. Once the FD is created the interest rates will be the same for the whole duration it will not change due to the market conditions.

Talking Interest rate of FDs at 6 %, if you invest Rs 10 lakhs you will get a monthly income of Rs 5,000.

For more details regarding visit the link Fixed Deposit

  • Post Office Monthly Income Scheme (POMIS)

POMIS is a scheme backed by the government in which fixed interest is earned every month throughout the duration. It is a low-risk investment. The interest earned is automatically credited to the Post office saving account. It is a guaranteed stream of income. This scheme is beneficial for those who are looking for protecting their capital.

Also, if the money earned is not needed from the monthly income then you can start investing the part amount in SIP or RecurringDeposit (RD). the interest received can be transferred to the RD recurring deposit directly in the post office which will help to build your capital over a long duration of time.

In POMIS the returns are guaranteed duration the 5 years and there is no TDS deduction. The investment duration is locked for 5 years. 

You can invest up to Rs 4.5 lakhs individually or can invest Rs 9 lakhs joint with 2 or 3 people. The minimum investment is Rs 1,500.

The Interest rate is 6.6 % per annum and it is payable monthly to the account.

  • Mutual Funds

Mutual funds are more popular investment products for wealth creation but it also has its limitations as they are depended on market conditions. Recently due to global finical crises, many mutual funds were in negative returns but as the returns provided are higher than FDs it has also its advantages.

The interest rates are subject to change in time. There is no assurance of fixed returns is mutual funds as they are associated with the market conditions.

Debt Funds (short term)

Equity Funds (long term)

There are two ways in mutual funds to generate monthly income

  1. SWP – Systematic withdrawal plans.
  2. Monthly Income Plans (MIP)

 

  • Systematic Withdrawal Plan (SWP)

You can get money income also if you have invested in any mutual fund and the fixed amount is withdrawn automatically every month from your investment. The remaining investment continuously grows.

In SWP there are 2 ways to withdraw

Fixed withdraw - The Fixed amount is withdrawn from the main investment of the fund. It does not depend on the performance and returns of the fund.

Appreciation withdrawal – the monthly income is depending on the performance of the fund.

  • Monthly Income Plans (MIP)

MIS is an open-ended scheme, with no lock-in period, high liquidity as compared to most other schemes, low risk, and better returns. Monthly Income plans are a type of investment in which the investors will be receiving income every month.

MIP are debt-oriented hybrid funds which invested in debt instrument some part inequities can perform better than fixed deposit and Debentures. The average returns from MIP is 8% per annum.

There are two types of monthly income

  1. Dividend monthly schemes
  2. Growth-oriented income schemes

 

  • Dividend-Paying Mutual Funds

There is a dividend plan in many mutual funds which provides dividend monthly directly to your account.

Dividend mutual funds are different from MIP mutual funds. These mutual funds under the dividend option after profits booking transfer the amount to the investors. You can receive monthly income by selecting the mutual funds which can provide monthly dividends. They are not fixed amount income and may vary according to the performance of the mutual funds.

For low-risk investors, you can start with liquid mutual funds which can generate around 6 to 8 percent returns annually and provide monthly income. In liquid mutual funds, you will receive a monthly dividend. They are low investment products. If the earning is more than Rs 1 lakh in a particular year there will be short- and long-term tax according to the duration. The income generated through mutual funds is mostly in dividend pay-out. Short term capital gains are less than 3years and Long-term capital gains are after 3 years.

No guaranteed of the monthly income value as it is dependent on market conditions and the returns can be negative in the short term.

Best MIP mutual fund plans

Aditya Birla Sun Life Regular Savings Fund Direct Plan-Growth

5Y Returns: 12.56 %

HDFC Hybrid Debt Direct Plan-Growth Option

5Y Returns: 10.67 %

ICICI Prudential Savings Fund Direct Plan-Growth

5Y Returns: 8.47 %

Reliance Hybrid Bond Fund Direct Plan-Growth Plan HDFC Hybrid Debt Direct Plan-Growth Option

5Y Returns: 11.18 %

Comparison of Monthly Income schemes

 

  • Corporate Deposit

The corporate deposits are types of deposit which is offered by various corporate companies, Non-banking financing companies (NBFCs) and housing finance companies. The interest is either payable monthly, quarterly, half-yearly, or yearly.

You should analyze the company financial and credibility details. The corporate deposit is not secure as bank deposit but it will be offering higher interest rates than bank FDs.

 

  • Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PM Vaya Vandhana Yojana Pension Plan (PMVVY) is a type of pension plan for senior citizens in India. The scheme has been extended for 3 years till 31st March 2023.

The revised interest rate for 2020-2021 is 7.4 percent.

The policy term of this pension plan is 10 years. The pension rate is 7.4 percent per annum payable monthly which is equivalent to 7.66 percent p.a. 

The minimum entry age to apply this plan is 60 years completed and no maximum entry age limit.

There are various pension plans by investing in single premiums and would receive pension monthly, quarterly, half-yearly, or yearly.

The pension scheme can be brought by investing a lump sum purchase price. The first installment of the pension plan is to be paid after 1 year, 6 months, 3 months or 1 month starting from the date of purchase.

For more details visit  Pradhan Mantri Vaya Vandana Yojana Pension Plan. 

  • Cumulative Bonds

The regular income can be also generated by Long- term Bonds which is another safe investment option. The maturity period may be for a duration such as 1 to 20 years.  These Bonds are offering non-cumulative interest which can provide regular income at various intervals. The income can be provided monthly, quarterly, half-yearly, and annually.

  •  Senior Citizens Saving Scheme (SCSS)

The Senior Citizen saving scheme is for the individuals of 60 years and above especially for senior citizens. It offers higher returns and are a risk-free investment. The minimum investment is Rs 1,000 and the maximum limit is Rs 15 lakhs.

This scheme is for the senior citizens who are looking for a fixed income in their retirement period. This scheme is a low-risk investment product for the retired people in their old age.

The Post office senior citizens saving scheme interest rates are 7.4 % per annum.

The maturity period is 5 years and can be extended for another three years. There is a penalty for premature closure of SCSS. TDS is deducted at source on the interest earned if the amount is more than Rs 50,000 per annum.

For more details regarding SCSS visit the nearest Post office for opening the Senior Citizens Saving Scheme.

Many other monthly income plans are also available such as

  • Dividend Stocks

You can also invest in High Dividend yield stock to created income. There is many PSU stock which pays 8-10 % dividend yield. This is a high risk, high returns investment products. You need to select the proper stocks for a better dividend.

You can receive regular income by investing in dividend stocks. As the stocks are volatile it has high risk. As the dividends are paid out of the profits generated sometimes companies do not pay regular monthly dividends.

Here are the stocks for your reference that are high dividend yield stock considered for the average 5 years IOCL, REC, Coal India, HPCL, Oil India. You may need to select the appropriate stock according to the risk and time factor.

  • Annuity Plans

There are also annuity plans offered by insurance companies providing monthly income. There are various options such as deferred annuity (provides money after a duration of time) and Immediate annuity (provides income as after investment). This plan is not so popular for monthly income plans as it involves high surrender fees and complex understanding.

  • There are various non-convertible debentures (NCDs) which are provided by various companies which are providing monthly income pay-out option.

 

Final thought

We have provided the best Monthly Income investment scheme for you. You need to understand and research the above investment products according to the time duration, goal, and risk appetite.

For new investor fixed deposit will be best as it is the safest investment, easy to understand, and providing fixed returns over the tenure.

If you are a highly conservative investor then the FDs and POMIS will be better as they are safe and guaranteed income plans

You can invest some part of your portfolio in MIS mutual funds as they provide monthly income on the base of market-linked returns. They are suitable for moderate risk investors. They also have Tax benefits.

You need to have various investment products to receive a regular flow of income for better safety purposes.

I hope you have got all the information regarding monthly income plans. If any doubt please comment on the below comment box.

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