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Understanding Different Investment Plans for Monthly Income
Table of Content
Being aware of the best investment options for steady income is fundamental to choosing an investment plan for monthly income. Here are some options that you can consider depending on your expectations:
What is a Monthly Income Plan?
Monthly income plans provide a regular income stream along with a provision for capital appreciation. They are an ideal option for retirement planning. These plans invest the contributions from investors in fixed-income options like SIPs, annuities, bonds, government securities, etc. Banks, financial institutions, and insurance companies provide monthly income plan options. By spreading the investment across various asset classes, the plan ensures a balance between a regular income stream and capital appreciation.
Types of Investment Plans for Monthly Income
Fixed Deposits
Fixed deposits are a popular investment plan for monthly income among risk-averse investors. Many banks and financial institutions offer this product with a monthly payout option. The interest earned on these deposits is credited to your savings account.
The interest rates are competitive, and the tenures are flexible. It is an ideal plan for a guaranteed monthly income. With flexibility in tenure from 6 months to 10 years, fixed deposit suits a short term investment as well as a long-term investment plan.
Post Office Monthly Income Scheme
The post office offers this savings scheme with a monthly income option. It is a government-backed scheme with guaranteed returns. The interest rates and the returns are fixed and not influenced by market fluctuations.
This is an ideal monthly return investment plan for those seeking capital protection. The maximum investment permitted in a single account is Rs. 9.00 lakhs, and in a joint account, it is Rs. 15.00 lakhs.
Government Bonds
Government bonds are among the top investment plans for monthly returns. They are debt instruments issued by the Central Government or State Government. This is the best investment plan for monthly income for investors to diversify their portfolios.
Investors prefer this bond because besides providing a stable monthly income, it is risk-free, can be easily traded in the secondary market, does not have a lock-in period, and carries the highest degree of safety.
Corporate Deposits
A Corporate deposit is issued by corporate companies and NBFCs at predetermined interest rates and is the best investment plan for monthly income. With fixed returns irrespective of the market situation, this is among the most suitable investment plans with regular payout options. The investors can choose either monthly or quarterly payouts depending on the frequency of their fund's requirements.
Though these deposits offer higher as well as steady returns, considering the risk they carry, investors should assess the credit rating and the historical performance and projections of the company before investing.
Monthly Income Plan
This is a monthly income investment plan designed for those who expect a steady income on their returns either to supplement their primary income or for retirees looking for a stable income for their post-retirement requirements.
Some of the best monthly income-producing investments are Annuity Plans, Senior Citizen Savings Scheme, etc. Insurance companies, banks, and mutual funds offer this monthly return investment plan.
Senior Citizen Savings Scheme
This is a long term investment plan backed by the government and considered the safest option, suitable for investors with low risk appetite. The scheme is designed for retirees and individuals aged 60 years and for those aged 55 years who opted for VRS (Voluntary Retirement).
This is one of the best fixed-income investments with a quarterly payout option. It is suitable for retirees seeking financial security for a financially secure retirement life.
Senior citizens can invest their retirement benefits in the scheme to a maximum extent of Rs. 15.00 lakhs for 5 years. This is one of the best steady income investment options that helps senior citizens maintain their lifestyle even after their regular income ceases.
Mutual Funds
Mutual funds, especially Systematic Investment Plans, i.e., the best SIP plans for monthly returns are the best monthly income generating assets. The fund creates a diverse portfolio encompassing debts and equity instruments depending on the investor's risk appetite and time horizon.
With regular income payouts, this is a monthly income best investment plan with higher returns than traditional options. By allotting funds to various assets, mutual funds ensure consistent income growth and are suitable for long-term objectives.
Pradhan Mantri Vaya Vandana Yojana
Pradhan Mantri Vaya Vandana Yojana is a government-backed scheme launched especially for senior citizens looking for avenues to invest with monthly returns. It is one of the safest monthly income schemes, providing regular pensions for 10 years.
Managed by LIC, this scheme allows a maximum investment of 15 lakhs. With regular monthly, quarterly, half-yearly, or yearly payout options, this scheme is considered one of the best fixed income monthly plans.
Life Insurance Plus Saving
An insurance policy with a monthly income option is a great way to secure your family’s financial future and for your retirement planning. You can receive a predefined monthly income on the maturity of the policy. This choice has to be made at the time of policy purchase.
Systematic Withdrawal Plans
ULIP, mutual funds, etc., are some of the best income plans with systematic withdrawal options. You can withdraw a fixed or a varying amount from your fund regularly. These plans keep the investment stable while providing a steady income stream. The withdrawal frequency can be monthly, quarterly, half-yearly, or yearly. You can change the withdrawal frequency depending on your financial requirements or even choose to stop the withdrawal.
Equity Share Dividends
When an investor buys shares of a company, he/she becomes entitled to a percentage of the company’s profit, depending on the shareholding level. The profit is distributed in the form of dividends. The equity share dividends are given out either monthly, quarterly, half-yearly or yearly to the investors.
Annuity Plans
Annuity plans are a safe investment for monthly income. Insurance companies issue these plans. You can invest a lump sum to generate monthly income for a financially secure retired life. Deferred annuity and immediate annuity are the two types depending on when you need the payouts to start. In an immediate annuity, you start receiving monthly payouts soon after you invest a lump sum. In deferred annuity. The payout will start after a fixed period. Either way, an annuity is the best investment plan for monthly income.
Factors to Consider When Choosing the Investment Plans for Monthly Income
To develop investment strategies for monthly cash flow it is crucial to consider factors that affect the investment plans. The following are some of the factors to be considered to ensure a stable income:
Risk Level
Evaluating the risk level while choosing a monthly income best investment plan is critical. Individuals with a low risk appetite, i.e., those who seek capital protection, should opt for guaranteed fixed income monthly plans like Senior Citizen Saving Scheme, Post Office Monthly Income Scheme, Pradhan Mantri Vaya Vandana Yojana, Fixed Deposits, etc. Though the returns are much lesser compared to high-return monthly income plans like stocks, mutual funds, corporate deposits, etc., they are not affected by market fluctuations and provide fixed returns.
The strategy to be adopted for the best investments for passive income is creating a diverse portfolio to balance the risks and rewards for a regular monthly income without compromising financial security.
Return on Investment
Return on investment is a yardstick that helps measure the profitability generated from an investment. It helps in identifying long-term monthly income investment plans that provide stable income.
When choosing the best investment plan for monthly income, comparing the performance of different investments is pivotal. Balancing the risks and rewards by combining investments providing stable returns with capital protection and risk-associated high-return investments like mutual funds, equity, corporate deposits, etc.
Tax Implications
Exploring the tax implications while choosing the best investment plan for monthly income is important as it affects the net returns. The interest received on schemes like fixed and corporate deposits is added to your income, while tax at source is collected for dividends from mutual funds.
You can derive the benefit of tax deduction from schemes like the Senior Citizen Saving Scheme, NPS, PPF, etc. Aim to enhance net returns by investing in tax-efficient investment plans.
Flexibility
Flexibility in changing the portfolio depending on market fluctuations and changing goals is the most important factor to look for while investing in the best investment plan for monthly income. Easy accessibility to funds is another significant aspect to consider while choosing a plan. Mutual funds and ULIPs allow portfolio change and partial withdrawal of funds.
Flexibility provides the advantage of modifying your investment portfolio to maximise returns, meet emergencies, and reallocate funds depending on market trends. This way, it takes care of financial stability and growth.
Why Invest in a Monthly Income Plan?
The reasons for investment with monthly returns are:
Steady Cash Flow
A steady income is essential to make ends meet. A monthly income plan provides a resource to manage financial obligations in the absence of the sole earning member, on retirement when the regular income ceases, or it can be an additional income besides salary and can help in investing for the future.
Investment Diversification
Monthly income plans invest in various asset classes. It will normally be a combination of fixed-income securities like bonds and equities, balancing growth potential and safety. The investment spread helps generate monthly income along with a potential for capital appreciation.
Tax Savings
Monthly income plans provide guaranteed monthly income and also extend tax benefits under Section 80C and Section 10(10D) of the IT Act 1961. The premiums paid towards the plans are eligible for deduction under Section 80C*, and the maturity and death benefits are tax-exempted under Section 10(10D)*.
Convenience
MIPs are more liquid than equity investments. They may not be as accessible as fixed deposits, but you can easily sell the units under MIP. Exercising prudence while selling the units provides good value. On the contrary, you may incur losses if it is a distress or hurried sale. You should always sell the units when the market is high to get substantial returns.
Room for Growth
MIPs are ideal an ideal investment option for risk-averse individuals. You get the dual benefit of stable income and capital appreciation. A portion of the funds are invested in fixed-income securities, while the rest are put in equities. MIPs emphasise investments that provide regular income. However, the equity component enables capital appreciation.
Why a Monthly Income Plan Is Important?
The best investment plan for monthly income is important for the following reasons:
Planning for Retirement
Planning for retirement is crucial to being financially independent during your golden years. Monthly income plans create an avenue for regular income along with growth potential. You can opt for payouts at monthly, quarterly, half-yearly, or yearly intervals, depending on your requirements and financial goals. On retirement, you can be financially independent and need not rely on others for your monthly sustenance.
Reducing Risk
Monthly income plans reduce risk by diversifying the portfolio and allocating funds according to individual financial goals and risk tolerance levels. Also, the professional management of funds ensures informed decisions. The funds are distributed across various asset classes, and thus, risk is minimised. The portfolio is reviewed and adjusted regularly depending on market trends. This approach protects the investors against downside risks.
Reaching Your Goals
The strategic investment approach, regular reviews and adjustments, customised asset allocation, and professional fund management help in maximising returns to reach your financial goals.
Planning for Your Legacy
MIPs invest funds in a mix of debt and equity. They provide a regular income stream while protecting and growing the capital over time. By helping build a corpus, MIPs help build a legacy. The spread of investments ensures stability and growth. Reinvestment of returns helps in accumulating wealth and passing it on to the next generation.
Managing Your Budget and Expenses
MIPs provide a monthly income stream and help manage your expenses without depending on savings. They are an ideal investment option for those with fixed-income needs. The fixed payouts help retirees to plan their expenses within their income.
Freedom and Flexibility
MIPs provide regular payouts customised to individual requirements. These plans provide the freedom to choose monthly, quarterly, half-yearly, or yearly payout options. MIPs are convenient as the investors have the freedom to change the payout options with changing needs or can opt for stopping the payouts and reinvesting the same to enhance the returns.
Conclusion
Several investment plans for generating monthly income are available, catering to the risk appetite and goals of the investors. Choosing the best investment plan for monthly income from a wide range, including life insurance with savings plans, can be overwhelming. However, developing investment strategies to get the best out of the investment considering the risk level, return on investment, tax implications, and flexibility is crucial. Life insurance with savings plans offer an added advantage of protection along with investment returns, making them a valuable addition to income-generating portfolios. To maximise returns, create a diverse portfolio to balance the risks and rewards. Consult financial advisors for efficient investment plans if you are a novice in the field.
FAQs About Best Investment Plan For Monthly Income
Q. What is the best investment to get monthly income?
The best investment to get monthly income depends on the risk tolerance level. Individuals who seek capital protection with stable returns can opt for fixed deposits, corporate deposits, Senior Citizen Savings Scheme, NPS, PPF, etc. For risk-associated high-return investments, you can consider mutual funds, stocks, ULIPs, etc.
Q. Which types of investment plans provide monthly returns?
The various investment plans that provide monthly returns are fixed deposits, senior citizen savings schemes, NPS, Mutual Funds, Post Office Savings Schemes, Stocks, Corporate Deposits, etc. Before choosing the best investment plan for monthly income, you should consider your financial goals, the time horizon you prefer, flexibility, payout options, etc.
Q. How do mutual funds provide monthly income to investors?
Mutual funds extend two options to investors to earn monthly income. One is the dividend option, wherein you receive a portion of the fund’s profit periodically. The other is the systematic withdrawal, wherein you can withdraw a fixed amount from your investment periodically.
Q. How do I calculate monthly returns from my investment plan?
The formula to calculate your monthly returns from an investment plan is ROI=net profit/cost of investment/*100. For investors, return on investments depicts the profit from investments, and for those who have invested in mutual funds, ROI shows the gain from mutual fund schemes.
Q. What factors should I consider when choosing the best monthly income investment plan?
The factors you should consider when choosing the best investment plan for monthly income are risk level, return on investment, tax implications, and flexibility.
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Francis Rodrigues
Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.
Written By:
Vishal Subharwal
Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.
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HDFC Life
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This material has been prepared for information purposes only, should not be relied on for financial advice. You should consult your own financial consultant for any financial matters.
18. Save 46,800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are a Regular Individual, Fall under 30% income tax slab having taxable income less than Rs. 50 lakh and Opt for Old tax regime.
* Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions. Tax Laws are subject to change from time to time. Customer is requested to seek tax advice from his Chartered Accountant or personal tax advisor with respect to his personal tax liabilities under the Income-tax law.
** The past 5 year fund performance of HDFC Life Discovery Fund (SFIN: ULIF06618/01/18DiscvryFnd101) as on 30th November 2024. The benchmark taken into consideration here is is Nifty Mid Cap 100 which as a return of 26.77% as on 30th November 2024. HDFC Life Discovery Fund is available with HDFC Life ULIPs which comes with a life cover. Please note past fund performance is not indicative of future performance.
ARN - MC/01/25/20207