When it comes to the world of investment, an increasing number of individuals are seeking steady sources of monthly income as a means of securing their financial future. They aspire to retire early, travel and pursue their passions without worrying about the financial hurdles that would come their way. In such a scenario,
the search for the best monthly income scheme becomes paramount. In India, avenues are abundant, but which one is the most secure, reliable, and offers a steady cash flow becomes the crux of the matter.
Luckily for investors, the variety of schemes available today caters to a diverse set of preferences and risks, ensuring maximum returns at minimum risk.
Fixed Deposits
One of the oldest and most trusted forms of investing has been in Fixed Deposits (FDs). You invest a lump sum with a bank or non-banking financial company (NBFC) for a fixed period at a fixed interest rate.
The latest FD interest rates vary depending on the bank or NBFC and the tenure of the deposit, the interest rates for a 5-year tenure range from 5% to 7.5% p.a. for the leading banks in India. Some of the banks also offer senior citizen benefits and a higher interest rate for them.
You should note that FD returns are not tax-free. TDS (Tax Deducted at Source) is applicable on interest earned, and it falls under the tax slab that the investor belongs to.
Fixed Deposit (FD) is an excellent option for risk-averse individuals and those wanting steady returns. However, the inflation rate of 5% per annum roughly eats off the returns earned from the same.
Debt Mutual Funds
Debt mutual funds further offer an option wherein the money is invested in low-risk bonds, government securities, and money market instruments, ensuring a steady flow of income.
The expected returns on debt mutual funds are approximately 7% to 9% depending on the scheme’s risk involved.
However, they are subject to market risk and are exposed to the vagaries of the underlying bonds and securities. It is recommended to choose a fund that is not invested in risky, long-term debt to avoid any potential risks.
Senior Citizen Savings Scheme (SCSS)
The Government of India offers a Senior Citizen Savings Scheme (SCSS) to individuals who have attained the age of 60 years or above. It provides a secure opportunity to the elderly to receive regular income.
The scheme is for a five-year period, which can be extended to an additional three years and offers an interest rate of 7.4%. However, one can invest up to INR 15 lakhs in this scheme.
Post Office Monthly Income Scheme (POMIS)
Another secure investment option for individuals seeking a steady cash flow is the Post Office Monthly Income Scheme (POMIS). The scheme provides a fixed monthly income, ensuring steady income monthly.
The minimum investment amount is INR 1,500, with a maximum cap of INR 4.5 lakhs for an individual and INR 9 lakhs for joint account holders. The scheme offers interest rates of 6.6% per annum, with a maturity period of five years.
Real Estate
Real estate investment trusts (REITs) or rental property investment can provide a monthly income to individuals seeking the same. Investors who have sufficient capital could purchase properties and invest in rental properties that generate steady monthly rental income; this can provide a long-term reliable income source.
REITs offer another alternative option for income-seeking investors. As per reports, the initial complementary dividends for REITs are estimated to be around 6%, and there have been significant investments in them since their introduction.
Equity Income Funds
Equity income funds invest in equities that offer high dividends, ensuring a steady monthly income that can benefit investors willing to take higher risks. Note that the returns of these funds are not guaranteed and are subject to fluctuations due to market risk.
The returns on such investments depend on the performance of the equity markets and are amongst the most volatile and at the investor’s disposal should be invested with utmost care and due diligence. However, Equity income funds do form an integral component of a diversified portfolio.
Provident Fund
A crucial aspect of any monthly income scheme is maintaining a healthy ‘PF balance.’ The Provident Fund (PF) balance signifies the accumulated contributions made by both the employee and the employer, serving as a financial safety net for the future. It’s imperative to monitor and manage this balance judiciously, as it forms a cornerstone of one’s retirement corpus. Keeping a keen eye on the PF balance ensures a steady stream of income post-retirement, providing a reliable source of monthly income through pension schemes or lump-sum withdrawals, thereby contributing significantly to one’s financial stability and peace of mind during the retirement phase.
Summary
With numerous monthly income schemes and options available, it is imperative that investors gauge the pros and cons of each scheme before making any investments. Even though the various securities offer relatively stable monthly income, it is wise to note that the returns are subject to the prevailing interest rates, the market fluctuations, and performance. Therefore, any investment’s success depends on the extent of the risks you are willing to bear to earn reliable monthly income. Indian Investors are advised to follow the stock market closely, consider the current economic conditions, inflation, income tax rules, and any recent changes in the legal framework.
In conclusion, though the options available are many, it is always wise to know the risk-return profiles before deciding on the best monthly income scheme that suits one’s preferences. And lastly, investing in the financial markets is a two-sided sword, the investor needs to understand the risks and do their due diligence.