Top Long Term Investments That Can Generate Regular Monthly Income

1. Invest in Post Office Monthly Income Scheme

Many of you must have heard about the investment schemes of the post office. Now you can take advantage India Post’s Post Office Monthly Income Scheme (POMIS) is a kind of investment and a good way. It is supported by the Government of India; It is a great investment option for risk-averse individuals seeking consistent regular income.

POMIS currently offers an annual interest rate of 7.4% payable monthly. The deposit period of this scheme is five years. Individuals can contribute up to 9 lakhs, whereas joint account can invest up to 1.5 million. You can start investing in this scheme as low as 1,000. When the POMIS investment matures, it can be reinvested for another five years.

Salient Features of POMIS Scheme:

A) Maturity period- 5 years.

b) Number of holders- Min. 1 and maximum 3 persons can hold Post Office MIS (Monthly Income Scheme).

c) Nomination- After the death of the investor only the nominee will get all the benefits of the scheme. After opening a secure account like our bank accounts, the nominee can be assigned later.

d) Transfer – Anywhere in India – From one Post Office to any other Post Office in India.

e) Taxability- Any income from this scheme is not covered under TDS or tax deduction. Post Office Monthly Income Scheme tax benefit is zero.

benefits:

Capital protection, Low risk investment, Lock-in period- There is a minimum lock-in period of 5 years which can be withdrawn after maturity (Interest will be paid monthly). It is an affordable investment plan as you can start it with even less capital or investment.

Protects you from times of high inflation and you get pre-determined monthly interest. Due to online banking services, you can manage transactions including deposits and withdrawals very easily.

Post Office Monthly Income Scheme is the best scheme for risk averse investors who want monthly income. It is suited for those looking for long term investment and regular income. For portfolio diversification and senior citizens, this is the best scheme.

2. Invest in Government Long Term Bonds/Gold Bonds/Securities.

First, let’s understand what is a government long term bond? These government securities are government or treasury bonds issued by the government to raise funds for infrastructure development, operations or other expenses. Government issues fixed interest rates and maturity dates ranging from a few months to several years.

The principal amount of the bond is returned to the investor along with the accrued interest at maturity. It is considered a safe and profitable investment option that gives you guaranteed returns (fixed and variable term based). Government bonds are considered safe investments because the government is a reliable borrower and is unlikely to default on its debt obligations. This is a good alternative to fixed deposits in banks.

Types of Government Bonds-

Fixed Rate Bonds, Sovereign Gold Bonds (SGB), Inflation-Indexed Bonds, PSU Bonds and Zero-Coupon Bonds. These bonds are highly liquid and some of them are even being traded on stock exchanges, which means you can buy and sell them in secondary markets.

3. Invest in Monthly Income Plan Mutual Funds

Monthly Income Plan (MIP) is a type of mutual fund investment that primarily invests in debt and equity securities with a mandate to generate cash flows and preserve capital. In this plan, you opt to receive income or profit from your mutual fund investments at regular intervals instead of reinvesting the amount.

Using SWP (Systematic Withdrawal Plan) is a better option to earn regular income through Mutual Funds. An SWP is unlike a SIP (Systematic Investment Plan), wherein you invest in mutual funds in installments. In a SIP, you transfer money from your bank account to your preferred mutual fund scheme, while in an SWP, you move money from your mutual fund investments to your bank account. (You could have already invested the lump sum amount to get this pay-out had you planned with this investment portion).

4. Invest in Real Estate

This is the most traditional yet well-known investment option for recurring returns. You can earn regular rental income through properties. Corporate office, shop, room rent, agricultural land, shared office space are some examples of real estate rental income.

In fact, even if you do not have a huge amount to invest in such high-budget properties, you can still invest in real estate to get this regular income. wonder how? REITs are for you. REIT or Real Estate Investment Trust can be described as a company that owns and operates real estate to generate income. Real estate investment trust companies are corporations that manage portfolios of high-value real estate properties and mortgages. For example, they lease out properties and collect rent thereon. The rent thus collected is later distributed among the shareholders in the form of income and dividends.

5. High Dividend Paying Stocks

If you have a well-planned portfolio, you get the benefit of Dividends for a regular source of income. This is a comparatively risky option. Dividends can be an important factor as investors view it as a source of income from investments. It is a driving factor for new investors and a few years ago, when the stock market was not very technology-driven, it was one of the top factors.

Factors to Consider When Investing in the Highest Dividend Paying Stocks Yield Ratio: A high yield ratio indicates that the company is reinvesting very little amount in the business and paying out more to shareholders. Hence, always do a thorough analysis of the financial position of the company before investing. Risk: High dividend paying stocks are generally considered safer than other growth stocks. The reason behind this is that when there is a sudden market crash or fall, the high dividend paying stocks do not lose their value.

These stocks also help in diversifying the risk appetite. However, consider your risk appetite before investing. Fundamentals: Investing in a company because of its high dividend payouts can be fatal for your portfolio in the long run. Therefore, it is wise to analyze the company for its fundamentals instead of looking at the high dividend yield. For performance we may still choose this option up to some point.

Some of the high dividend paying stocks from Nifty 50 are GAIL, Hindustan Zinc, Tata Steel, Bajaj Auto, Hero MotoCorp, HCL Technologies, Tech Mahindra and JSW Steel.

6. Systematic Withdrawal Plan

A Systematic Withdrawal Plan (SWP) is a scheduled investment withdrawal plan commonly used in retirement, although it is not mandatory. A Systematic Withdrawal Plan or SWP is a facility that allows investors to withdraw a fixed amount regularly from a mutual fund scheme. You can choose the amount and frequency of withdrawals as per your requirement such as monthly, quarterly, half-yearly or annually.

You can also choose to withdraw your investment profits while keeping your invested capital intact. On the specified date, the units in your portfolio are sold and the funds are transferred to your account.
Why should you choose SWP?

Act as a regular source of secondary income In today’s time there is a need for an additional source of income to cope with the rising cost of living. Investing in mutual funds and making withdrawals through SWP is a great way to create a regular source of secondary income. Build your own pension – Regardless of whether you have a pension plan or not, you can build a corpus about 5 years before retirement and invest it in a mutual fund scheme as per your risk tolerance. Once you are retired, you can start SWP and create your own pension.

Protect Your Capital – If you are highly averse to taking any risk with your investments, you can initially invest in Arbitrage Mutual Fund schemes. These schemes offer assured returns with almost zero risk. You can opt for the dividend option and invest the dividends in debt schemes using SIPs. After all, you can start an SWP and earn regular income without risking your capital.

7. Corporate Deposit

Corporate Deposits or Company Fixed Deposits are term deposits, in which you keep your money for a fixed period at a fixed rate of interest. They are offered by Non-Banking Financial Companies (NBFCs) and other financial institutions. Compared to a regular bank fixed deposit, they fetch a higher rate of interest. The maturity of company FDs ranges from a few months to a few years.

Before investing always keep certain points in mind such as the background of the company, repayment history and credit rating. Some of the top corporate FDs are Bajaj Finserv, HDFC, ICICI Home Finance, LIC Housing Finance, PNB Housing, Mahindra Finance FD, Shriram Transport Finance FD and Sundaram Finance Company FD. Tax effect on Corporate Deposits – Applicable as per the active slab.