Everyone wants to become wealthy in life, but it requires money, and everyone desires to ensure a constant source of earnings to increase their earnings. While income from a job or business is essential, having investments that generate regular returns can be immensely valuable. This is where the concept of generating monthly income through wise investments comes into play. Retirees and seniors often rely on such monthly payouts from their investment portfolios.
The best investment options for monthly income vary depending on an investor’s risk appetite, investment horizon, and liquidity needs. Options like fixed deposits, recurring deposits, and bonds offer lower but stable returns with high safety. Debt mutual funds and income-generating real estate offer higher returns but are more volatile. High-dividend-yielding stocks can provide attractive income streams if the business fundamentals remain strong.
This article discusses various investment options.
1) Fixed Deposits
Fixed deposits are one of the simplest and safest options for generating monthly income. You deposit a good amount for a fixed tenure; the bank pays you a predetermined interest rate. The interest is paid to you monthly, quarterly, half-yearly, or annually, as per your preference. Most banks provide interest rates of 5% to 7% for fixed deposits. The amount remains safe, and you get a regular stream of income.
2) Recurring Deposits
Like fixed deposits, recurring deposits allow you to build a corpus over time with monthly installments. You deposit a fixed monthly amount for a defined period, and the bank pays you interest on the accumulated amount. You get the lump sum amount at maturity, along with accumulated interest. The interest is usually lower than fixed deposits but still stable and safe.
3) Government Bonds
Government bonds are a kind of debt instrument issued by the government. They offer attractive interest rates and the safety of the principal. Some bonds like NSC (National Savings Certificate) and SCSS (Senior Citizen Savings Scheme) pay annual interest, but bonds like RBI Floating Rate Bonds pay interest monthly. Seniors can invest in government bonds and use the monthly interest as regular income.
4) Debt Mutual Funds
Debt mutual fund schemes that have an investment mandate of investing in high-quality debt instruments can generate decent returns in the range of 7% to 8% annually. Some debt mutual funds like liquid, overnight, and ultra-short duration funds pay out interest earned monthly, providing a regular income stream. They are relatively low-risk but offer higher returns than fixed deposits.
5) Dividend Stocks
High dividend yield stocks provide an ideal way for investors to develop monthly or quarterly income. Companies with strong cash flow and healthy profit margins often reward shareholders through dividends. You can reinvest stock dividends to accelerate returns or take them as cash to supplement income. Do thorough research before investing in dividend stocks.
6) Real Estate
Commercial properties like apartments, office spaces, warehouses, etc., that are put on rent generate monthly income from rental payments. Commercial real estate offers higher returns but requires a large capital outlay initially. Residential rental properties like houses and villas can also provide a monthly income if rented out properly and managed efficiently.
7) Post Office Monthly Income Scheme
Post Office monthly income scheme is a retirement-oriented savings scheme offered by India Post. You invest a lump sum amount for 5 years, and in return, you get monthly interest payments. The interest rate changes every quarter, and anyone can withdraw the principal amount at the end of 5 years. It offers tax benefits and helps build a steady stream of income.
8) Senior Citizen Saving Scheme (SCSS) and the Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The Government of India offers several schemes to enable senior citizens to earn stable returns and maintain a regular income. These two are the most popular investment schemes for senior citizens is to invest savings in the Senior Citizen Saving Scheme (SCSS) and the Pradhan Mantri Vaya Vandana Yojana (PMVVY).
The SCSS is a post office savings scheme that offers an interest rate of 7.4% per annum, payable quarterly. Citizens aged 60 years and above can invest a minimum of Rs. 1000 to Rs 15 lakh in the scheme. The tenure is 5 years, extendable by 3 more years. Partial withdrawals are allowed after one year. The scheme offers direct tax benefits under Section 80C, but the interest income is taxable.
The PMVVY is an annuity pension scheme from LIC that guarantees senior citizens an annual return of 7.4%, paid monthly. Citizens aged 60 years and above can purchase an annuity for a minimum amount of Rs 1,56,658. The pension authority operates the scheme for 10 years, paying out the pension at the end of each period. Up to 75% of the total purchase amount can be a loan. The interest proceeds are taxable, but tax benefits are available under Section 80C.
Conclusion:
Your best options for stable monthly income from investments are fixed deposits, recurring deposits, bonds, and debt mutual funds. These provide the most secure and predictable monthly returns but at lower yields.
Dividend-paying stocks can offer higher monthly income potential through dividend payments but come with more risk and fluctuation based on company performance. Research companies carefully and diversify your investments across sectors. Real estate investments like rental and commercial real estate can generate attractive monthly income from rental payments. However, they require more capital upfront and active management of the properties. Government schemes like the Senior Citizen Savings and Pradhan Mantri Vaya Vandana Yojana provide stable returns for retirees and senior citizens through monthly interest and pension payments.
