hello ,I am 36 year old now ,i have my own house ,living with 3 Kid and with my Parent , I am the only earning Person in my home ,i do travel business and did some jibs earlier i have saved 50 Lakh since i start my carrier ,but now my business is not doing good so now i am looking to invest 50 Lakh to generate an imcome of alteast 1 Lakh rs per month as fix income so suggest me some ways
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
Question by Rajat on Apr 15, 2024Hindi
