Your guide to earning a monthly 'salary' through investments
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Your guide to earning a monthly 'salary' through investments

  • Highlights

  • Investment options for risk-averse investors

  • FDs as ideal investments for all ages

  • Additional FD interest rates for senior citizens

  • 20% to 30% investment in equity securities

The Indian work culture has undergone a paradigm shift through the years. Earlier, it was considered natural to join a company and continue working for it until retirement, thus earning you a few added benefits and maybe even a pension.
Today, however, it has become customary to jump from one company to another in hopes of finding better opportunities. And even though this practice may restrict you from enjoying the steady benefits associated with sticking to a single employer, it does grant invaluable exposure to your CV.

However, the question remains whether you, as a new-age employee, can save enough money for retirement, without any form of pension to fund your daily expenses. And even if you are far away from any thoughts of retirement, it’s still a great feeling when you are financially free and do not have to worry about using all your salary for monthly expenses.Fortunately, thanks to an ever-increasing number of investment options available in the market today,you can attain financial freedom by opting for the ones that offer monthly payouts.

The best investments for earning a regular income

1. Corporate Deposits
There are a lot of corporations offering a high interest rate based on their ratings and deposit tenor. Usually, they are offered by Non-Banking Financing Companies (NBFCs) and housing finance companies. Such companies provide interest on a quarterly or half-yearly basis, and can be arranged to offer you returns for any four months in a year.
They come with additional attractive interest rates for senior citizens. It is important to remember that there is a slight risk of delay in payment or default from companies. That is why, you should try to ensure that your chosen company has high credibility and consistently stable ratings of at least AAA. In order to diversify the risk, you can distribute your money into deposits with multiple companies, which will also help ensure you receive income for every month of the year.

2. Post Office Monthly Income Account Scheme
For those investors with a zero tolerance for risk and hopes of earning continuous income, the post office monthly income account scheme is one of the best available options. The interest is paid at a 7.8% annual rate.
The accounts opened between December of 2007 and November of 2011 will receive a bonus of 5% on the principal amount when they mature. Although the maturity period for this scheme is 5 years, you can withdraw earlier if you complete one year of deposit. Withdrawing between 1 year to 3 years of deposit results in a 2% deduction. If you withdraw between 3 years to 5 years, you will incur a 1% deduction from the total amount deposited.


Bajaj Finance Fixed Deposit Features & Benefits

3. Senior Citizen Savings Scheme
The post offices in India offer a special investment scheme for people aged 60 or above, which is called a senior citizen savings scheme. It is another type of risk-free instrument that can offer significant returns. An important clause is that if you retire under the Voluntary Retirement Scheme, or on super annuation, you are allowed to be between the 55 years to 60-year age bracket.
However, remember that you have to open your account within the first month of receiving the retirement benefit, and the amount you deposit should not be greater than the retirement benefit amount received. An interest rate of 8.6% calculated annually can be availed under this scheme by those who invested after the 1st of April, 2016.

4. Long-term Government Bond
Another negligible-risk option with good returns, a long-term government bond pays interest once or twice a year. You can club it with the other best investment plan for monthly income. Since they are traded on the secondary market, you can sell them whenever you wish. However, the catch is that you have to lock-in your funds for a considerably long tenor which can go up to 15 or 20 years.

5. Equity Share Dividend
This option allows for investment appreciation over the long term along with the promise of a regular income, but the risk factor is very high. You are required to build a diverse portfolio including multiple stocks so as to facilitate a high dividend payout ratio. Since you receive dividends on profits and not on capital, there is a greater-than-average possibility of companies not paying regular dividends.

6. Annuity
Indian insurance companies are known to offer annuity plans that offer low risk and a regular income. You can use this as a retirement strategy by making a lump sum investment to earn income at fixed intervals. The primary method of classifying annuity plans is based on the duration of payment period, and is divided into Deferred annuity and Immediate annuity.
Deferred annuity provides money after a fixed tenor period set by you, while Immediate annuity involves receiving regular income as soon as you make the lump sum payment. Keep in mind, however, that there are various charges involved in annuity investment, which include commission and surrender fees. It is also taxable and does not yield any tax benefits.

7. Mutual Fund Monthly Income Plan
This plan is ideal for beating inflation, provided you are ready to take a moderate amount of risk. The ratio is usually 20% to 30% investment in equity securities, and 80% to 70% in debt instruments like certificates of deposit. A good tenor for this plan is between 2 to 3 years, and you can receive monthly income by selecting a dividend-payout option. However, the equity component makes it difficult to acquire regular dividends due to the fact that dividends are only paid on profits, and not the invested capital.

8. Fixed Deposit
A perennial option for those looking for good returns on almost no risk, fixed deposits are ideal for all age groups. The better companies that offer fixed deposits carry a high credit rating and consistent stability. You can opt for a non-cumulative fixed deposit to acquire monthly payouts, but make sure the interest rate is not too low. Also, it is advisable to look for a company that offers added benefits, like online account management and fixed deposit calculators.

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