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Business News/ Money / Personal Finance/  Top long term investments that can generate regular monthly income
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Top long term investments that can generate regular monthly income

A long-term investment is an investment approach in which an investor purchases assets and maintains them for a long run, usually more than five years, in accordance with his or her risk tolerance.

Bank fixed deposits are popular investment instruments. (Photo: iStock)Premium
Bank fixed deposits are popular investment instruments. (Photo: iStock)

A long-term investment is an investment approach in which an investor purchases assets and maintains them for a long run, usually more than five years, in accordance with his or her risk tolerance. Stocks, bonds, mutual funds, real estate, and retirement accounts are the most popular long-term investment options. These instruments not only provide the power of compounding but also reduce short-term volatility and provide tax advantages. Long-term investments include both fixed income, such as fixed deposit accounts, and market-based returns, such as equity investments. Here are long-term investment plans in India that can provide investors with stable income, as determined by a conversation with Vijay Laxmi A. Ambala, Co-Founder of Stock Market Today (SMT), a SEBI-registered financial advisory platform.

1. Invest in Post Office Monthly Income Scheme

Many of you had heard about post office investment schemes. Now you can avail India Post's Post Office Monthly Income Scheme (POMIS) is a type of investment and is a nice way of. It is backed by the Indian government; it is a great investment choice for risk-averse individuals seeking consistent regular income. 

The POMIS is presently giving 7.4% per cent annual interest, payable monthly. The deposit period for this plan is five years. Individuals can contribute up to 9 lakh, while joint accounts can invest up to 15 lakh. You may start investing in this plan with as little as 1,000. When the POMIS investment matures, it can be reinvested for another five years.

Key Features of the POMIS scheme:

a) Maturity period- 5 years.

b) Number of holders- Min. 1 and at max 3 individuals can hold post office MIS (Monthly Income Scheme).

c) Nomination- Only the nominee will get all scheme benefits after the investor’s demise. Nominee can be assigned later after opening an account safe as like our bank accounts.

d) Transfer- Anywhere in India – One Post office to any other PO in India.

e) Taxability- Any income from this scheme does not come under TDS or tax deduction. The post office monthly income scheme tax benefit is zero.

Benefits:

Capital Protection, Low-risk Investment, Lock-in Period- A minimum of 5 years is the lock-in period which can be withdrawn after maturity (Interest monthly pay-out will be there). It is an affordable investment plan as you can start it with even with low capital or investment. 

Protects you against high inflation time and you get pre-defined monthly interests. Because of online banking services, you can is very easy manage transactions including deposits, and withdrawals. 

Post Office Monthly Income Scheme is the best scheme for risk-averse investors who wants monthly income. It is favourable for those looking for long-term investment and regular income. For portfolio diversification & for senior citizens, it is the best plan.

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

First, let's understand what is Govt Long Term bonds? These Govt securities are sovereign or treasury bonds issued by the government to raise funds for, infrastructure development, operations, or other expenditures. The government issues fixed interest rates and a maturity date ranging from a few months to several years. 

The bond's principal amount is returned to the investor upon maturity, with interest earned. It is considered as a safe and profitable investment option which gives you guaranteed returns (fixed & 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. It is a good choice over fixed deposits in banks.

Types of Govt 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 being traded in Stock Exchanges too means you can buy and sell them on secondary markets.

3.  Invest in Monthly Income Plan Mutual Fund

A monthly income plan (MIP) is a type of mutual fund investment that mainly invests in debt and equity securities with a mandate of getting cash flows and preserving capital. In this plan, you opt to receive the income or profit from your mutual fund investments at a regular intervals rather than reinvesting the amount.

Using SWP (Systematic Withdrawal Plan) is a better alternative to earning regular income through Mutual funds. An SWP is the opposite of a SIP (Systematic Investment Plan), wherein you invest in Mutual Funds in instalments. In a SIP, you move funds from your bank account into your preferred mutual fund scheme, while in an SWP, you move funds from your Mutual Fund investments into your bank account. (You could have invested a lump sum already to get this pay-outs, that is what you had planned with this investment portion).

4.  Invest in Real Estate 

This most conventional yet famous investment option for recurring returns. You can earn a regular Rental income through properties. Corporates Office, Shops, room rent, Land of agriculture, shared office spaces are some of the examples for Real estate Rental Income.

In fact, if you don’t have a big amount to invest in such heavy-budget properties You can still invest in Real Estate to get this Regular income. Wondering how? REITs are there for you. REITs or real estate investment trust can be described as a company that owns and operates real estates to generate income. Real estate investment trust companies are corporations that manage the portfolios of high-value real estate properties and mortgages. For instance, they lease properties and collect rent thereon. The rent thus collected is later distributed among shareholders as income and dividends.

5. High dividend paying stocks

If you have a well-planned portfolio then you have the advantage of Divided for a regular Source of Income. It is a comparatively risky choice. Dividends can be an important factor as investors view it as a source of income from investing. It is a driving factor for new investors and a few years ago, when the stock market was not very technology-driven, it was among the top factor.

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 back into the business and paying more to the shareholders. Hence, always do a deeper analysis of the company’s financials before investing. Risk: High dividend paying stocks are usually considered safer than other growth stocks. The reason behind this is when there is a sudden market crash or decline, high dividend paying stocks do not lose their value. 

These stocks also help in diversifying the risk potential. However, consider your risk appetite before investing. Fundamentals: Investing in a company because of a high dividend pay-out can be fatal for your portfolio in the long run. Hence, it is wise to analyse the company for its fundamentals instead of looking at a high dividend yield. For the performance we can still opt for this option upto certain points. 

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 typically used in retirement however it's not compulsory. A Systematic Withdrawal Plan or SWP is a facility extended to investors allowing them to withdraw a fixed amount from a mutual fund scheme regularly. You can choose the amount and frequency of withdrawal as per your need such as monthly, quarterly, semi-annually, or annually.

 You can also choose to just withdraw the gains on your investment keeping your invested capital intact. At the set date, units from your portfolio are sold and the funds are transferred to your account.
Why you should opt for a SWP?

Working as a regular source of secondary income – In today’s times, an additional source of income is needed to tide over the rising cost of living. Investing in Mutual Funds and withdrawing via an SWP is a great way to create a regular source of secondary income. Create your own pension – Regardless of whether you have a pension plan or not, you can create a corpus around 5 years before retirement and invest it in a mutual fund scheme according to your risk tolerance. Once you retire, you can start an SWP and create your own pension. 

Protect your capital – If you are highly averse to taking any risks with your investment, then you can initially invest in Arbitrage Mutual Fund Schemes. These schemes offer assured returns with near-zero risk. You can opt for the dividend option and invest the dividend in a debt scheme using a SIP. Eventually, you can start an SWP and earn regular income without risking your capital.

7. Corporate Deposits

Corporate deposits or company fixed deposits are term deposits wherein you put your money for a fixed tenure 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 maturities of company FDs range from a few months to a few years. 

Before investing always keep in mind few points in mind such as Company’s background, 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 Implications on Corporate Deposits- Applicable as per active slab. 


 
 

 



 

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ABOUT THE AUTHOR
Vipul Das
Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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Published: 15 Apr 2023, 09:54 PM IST
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