Hi am 28 yrs old, married and have child of age 1.5yrs, i am very unfortunate as i was unable to complete my education due financial problem due to a serious health related problem at that time which have drained all of our savings, as of now i am...

Hi am 28 yrs old, married and have child of age 1.5yrs, i am very unfortunate as i was unable to complete my education due financial problem due to a serious health related problem at that time which have drained all of our savings, as of now i am some what stable, due to lack of educational certificate i am unable to join mnc for higher salary, my current salary is 17k per month ctc, i have a dream of opening a manufacturing business that requires around 40 lakh of initial investment, how could I accumulate such wealth as no bank is ready to give me a loan of such high amount, maximum they are offering is around 7-8 lakhs, pls note i also have depending mother and my wife is a house wife

Ans: It would be difficult to raise this capital, without investing anything on your own. The only way you can get money is through friends and family, or by mortgaging some asset that you might have. I would suggest you look for a job and start your venture after you have saved some money.

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Ans: You’ve made a commendable achievement in saving Rs. 50 lakh over the years. Given that your business is currently not performing well and you're seeking a stable monthly income, it's important to adopt a diversified investment strategy that generates reliable returns. Your goal of Rs. 1 lakh monthly income is achievable with the right mix of investments.

Understanding Your Needs
You need a fixed income of Rs. 1 lakh per month.
Your savings amount to Rs. 50 lakh.
The income should be stable and relatively risk-free, given the family responsibilities.
Considering these factors, let’s explore options that can generate a monthly income while maintaining a suitable level of safety.

Investment Options for Stable Income
Here are the key options you could consider for generating a fixed monthly income from your Rs. 50 lakh savings:

1. Fixed Deposits (FDs)
Safety and Stability: Fixed deposits are a low-risk investment option, offering guaranteed returns.
Interest Rate: Currently, FD interest rates hover around 7-8% per annum, depending on the bank and tenure.
Monthly Income: An FD of Rs. 50 lakh can generate about Rs. 35,000 to Rs. 40,000 per month, depending on the interest rate and tax treatment.
Taxation: Interest earned on FDs is taxable as per your income tax slab. This reduces the overall yield.
2. Debt Mutual Funds
Stability with Slightly Higher Returns: Debt mutual funds invest in government and corporate bonds, offering relatively safe returns.
Interest Rate: These funds can give you returns ranging from 6-9% per annum.
Monthly Income: Debt funds might offer you a slightly better return compared to FDs, but still, generating Rs. 1 lakh per month may require you to invest a larger amount.
Taxation: Interest income is taxed, but long-term capital gains (LTCG) on debt funds (held for over 3 years) are taxed at 20% after indexation, which is more tax-efficient than FD interest.
3. Monthly Income Plans (MIPs) of Mutual Funds
Balanced Approach: MIPs invest in both debt and equity, providing a mix of stable income and capital appreciation.
Returns: MIPs generally offer 8-10% annual returns.
Taxation: MIPs have tax advantages compared to FDs. The income from MIPs is treated as capital gains, which can be more tax-efficient.
Monthly Payout: By investing in MIPs, you can opt for monthly payout options that provide regular income. However, the returns are not fixed like FDs.
4. Systematic Withdrawal Plans (SWPs)
Capital Efficiency: Instead of opting for fixed income, you can use your mutual fund investments through an SWP. Here, you withdraw a fixed sum monthly from a mutual fund to get your desired monthly income.
Taxation: The gains from SWP are taxed as capital gains. Short-term capital gains are taxed at 15%, while long-term capital gains are taxed at 10% after Rs. 1 lakh per year.
Flexibility: You can choose actively managed funds to ensure better returns over time.
5. Real Estate Investment Trusts (REITs)
Alternative Income Source: REITs are another option for generating monthly income. They invest in commercial real estate properties and distribute income to investors.
Returns: REITs have historically offered returns in the range of 7-9% annually.
Taxation: REITs offer tax advantages by being pass-through entities. Dividend income from REITs is taxed at 10% after a threshold.
Risk: Though safer than direct real estate, REITs still carry market risks as they are linked to the performance of the real estate market.
6. Gold and Gold Bonds
Safe-Haven Asset: Gold has always been a safe investment, especially in uncertain times.
Returns: Direct investment in gold may not generate monthly income, but you can invest in Sovereign Gold Bonds (SGBs), which pay an interest of 2.5% per annum.
Taxation: Capital gains from gold are taxed at 20% after 3 years. SGBs also offer a capital gain tax exemption if held to maturity.
7. Balanced Mutual Funds
Growth with Income: Balanced or hybrid mutual funds invest in a mix of debt and equity. They offer a good growth potential with reasonable stability.
Returns: These funds can offer returns of around 8-12% per annum.
Taxation: These funds are subject to long-term capital gains tax after 1 year for equity portion, and 20% after 3 years for debt portion.
8. Corporate Bonds and NCDs
Higher Income: Corporate bonds and Non-Convertible Debentures (NCDs) offer higher returns than government bonds.
Returns: The returns are in the range of 8-10% per annum.
Risk: They carry slightly higher risk compared to government-backed bonds. It's crucial to select high-rated bonds to ensure safety.
Understanding the Right Allocation
To generate an income of Rs. 1 lakh per month (Rs. 12 lakh annually), you need an investment that can consistently provide returns in this range.

Suggested Allocation for Rs. 50 Lakh
40% in Fixed Deposits (FDs): Rs. 20 lakh invested in FDs will provide steady but lower returns.
30% in Debt Mutual Funds or MIPs: Rs. 15 lakh in these funds will give you moderate returns with a bit more risk.
20% in Systematic Withdrawal Plan (SWP): Rs. 10 lakh in actively managed equity funds for long-term growth and regular withdrawals.
10% in REITs or Corporate Bonds: Rs. 5 lakh can be invested in alternative options like REITs for diversification.
Evaluating Risks and Tax Implications
Risk: The portfolio suggested above balances safety with some growth potential. The FD portion offers low risk, while the debt funds and SWPs carry slightly higher risks.
Taxation: FDs will be subject to tax based on your income slab. Debt funds and MIPs offer tax advantages, with long-term capital gains being more tax-efficient.
Liquidity: Ensure you keep some portion in liquid assets (FDs or debt funds) for emergencies.
If You Choose to Keep Money in Fixed Deposit / RBI Bonds
If you opt for fixed deposits or RBI bonds, while the returns are guaranteed, the income generated will fall short of your monthly requirement (Rs. 1 lakh). The FD returns will be closer to Rs. 35,000-40,000 per month, which means you'll need additional income sources like debt funds or other income-generating investments.

Final Insights
Diversification: Diversifying across multiple asset classes, including FDs, debt funds, MIPs, and SWPs, will provide stability and growth potential.
Risk and Returns: A mix of safer options like FDs and debt funds with higher-yielding SWPs or REITs can help generate the required monthly income.
Regular Monitoring: Review your portfolio regularly to ensure that your investments are meeting your income goals.
By following a balanced approach and not over-concentrating in a single asset, you can generate the required income while preserving your capital.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment