In order to achieve financial security, individuals often diversify their income streams. The widely accepted notion is that investing in lucrative assets is a pillar of everyone’s successful financial plan. This is because having multiple sources of income is known to pave the way to help meet financial goals, build wealth, and create a financial safety net.
Those seeking a steady monthly income often consider investing in dedicated savings plans that yield high returns. These plans typically help individuals mobilize savings and provide them with a consistent income flow, making them ideal to ensure financial stability.
While there are several high-income-generating options available today, choosing the right kind of plan depends on one’s understanding of their needs. Hence, before looking for the best investment plans for monthly income, it’s crucial to understand one’s financial goals and risk tolerance.
On that note, let’s check some of the best investment options this year.
Senior Citizen Savings Scheme
The Senior Citizen Savings Scheme is a perfect match for those who are above 60 and wish to generate a steady income. Being a government-backed plan it offers peace of mind and a stream of guaranteed income. Notably, the plan offers high-interest returns, which are compounded quarterly and paid weekly. In addition, it allows individuals to invest for a tenure of 5 years, with an option to extend the term by three years. Individuals can open an SCSS account locally at any authorized bank or post office within a month of their retirement.
Post Office Monthly Income Scheme
POMIS is a government-backed investment option to generate a steady flow of monthly income, without being exposed to market fluctuations. The plan offers a lucrative fixed interest rate which compounds annually and is paid monthly. Individuals can start investing in the POMIS with as little as Rs. 1,500, making the plan accessible to all segments of society. Since the plan is endorsed by the Government, it offers peace of mind and the assurance of guaranteed returns. Typically, individuals can park up to Rs 4.5 lakhs in the plan, or in case of a jointly held account they can invest up to Rs 9 lakhs. POMIS allows individuals to hold the account for 5 years and reinvest the returns on maturity. These traits make the plan ideal for retirees looking for a regular income stream, risk-averse individuals seeking stability, and those looking to build a corpus for the future.
Government bonds
Those seeking stability guaranteed returns may find the government bonds quite lucrative. These low-risk government-backed investments prioritize security over high returns, making it ideal for those seeking stability. Since they are backed by the government, they offer no risk of default, which makes them suitable for risk-averse individuals. Notably, these bonds come with a maturity period ranging from 5-40 years. Individuals should take advantage of it and pick a bond with a maturity period that aligns with their goals. Individuals can avail of regular fixed payouts or coupon payouts set by the government throughout the term.
Corporate deposits
Corporate deposits are offered by NBFCs and housing finance businesses and are quite similar to regular bank deposits. These deposits boast attractive rates of interest compared to regular bank deposits, potentially boosting returns. Notably, some corporate deposits provide individuals with flexible features, such as early withdrawals or even tiered interest, which might be extended by banks. However, unlike bank deposits, corporate deposits come with a higher chance of default, especially in the case of financially unstable NBFCs or HFCs. This is why individuals should probe the issuing entity’s financial health, market reputation, and credit rating. Individuals should also pay attention to market interest rates, the deposit plan’s maturity period, and withdrawal options. They should also find out more about the added charges. Regardless, corporate deposits can prove to be lucrative means to generate higher returns for investment-savvy individuals but they are careful in analyzing the risk involved.
Monthly Income Plans
MIPs are essentially hybrid mutual funds that majorly invest resources in stable fixed-income options such as bonds and popular government securities, while a small portion of resources are allocated to higher-growth but significantly riskier equity options. MIPs offer monthly dividends that are distributed by the mutual fund, offering a healthy stream of income. Notably, Monthly Income Plans offer the best of capital appreciation and regular dividends, boosting individuals’ scope of returns. However, it should be noted that returns are targeted and not guaranteed as they depend on the mutual fund’s market performance. This means there’s no chance of generating returns or even incurring losses. Hence, individuals should analyze their risk-taking capacity before investing in this investment option.
Insurance cum investment
Insurance policies generating guaranteed income extend an ideal blend of insurance protection and guaranteed payouts, providing individuals peace of mind when it comes to their future. The double benefit allows individuals to enjoy the security of insurance coverage for their dependents while receiving steady earnings for themselves, especially after retirement. However, unlike other traditional investment options, these dual-benefit plan extends fixed monthly income unaffected by prevailing market volatility. Such plans help build a dependable source of income that helps them account for their retirement expenses, ensuring security and comfort. This policy requires a premium period before income payouts begin. However, the premiums for these plans are relatively higher than traditional plans primarily because of the guaranteed income aspect. Since insurance typically offers tax benefits in certain cases, individuals should find out whether they are eligible for it under these plans and then find out their eligibility with the help of an income tax calculator.
Systematic plan
An ideal investment to generate monthly income largely depends on one’s unique goals and risk-taking capacity. This is why they should opt for a plan that suits them. Individuals should prefer investing a substantial part of their resources upfront to tap into the best investment options’ growth potential. Those who wish to spread their investment over a period often opt for the systematic investment plan route to build a reliable corpus by mobilizing smaller savings at regular intervals. On the other hand, those looking to withdraw a fixed amount at regular intervals to create a steady income stream, choose the Systematic Withdrawal Plans.
