The best long-term investments that can generate regular monthly income

1. Invest in a Post Office Monthly Income Scheme

Many of you have heard of post office investment schemes. Now you can take advantage of India Post Office Monthly Income Scheme (POMIS) is a type of investment and a good way to go. He is backed by the Government of India; this is an excellent investment choice for people who are not inclined to risk and strive for a stable regular income.

POMIS currently yields 7.4% per annum paid monthly. The term of the deposit for this plan is five years. Individuals can deposit up to ₹9 lakh while joint accounts can invest up to ₹15 lakhs. You can start investing in this plan with just ₹1000. When the POMIS investment matures, it can be reinvested for another five years.

Main characteristics of the POMIS scheme:

A) Repayment period – 5 years.

b) Number of holders – Min. 1 and a maximum of 3 people can have a post office MIS (Monthly Income Scheme).

c) Nomination – Only the nominee will receive all the benefits of the scheme after the death of the investor. Nominal can be assigned later after opening an account as secure as our bank accounts.

d) Transfer – Anywhere in India – one post office to any other PO in India.

e) Taxation. Any income from this scheme is not eligible for the TDS or tax deduction. The post office’s monthly income tax credit is zero.

Advantages:

Capital protection, low risk investment, lock-up period – minimum 5 years is the lock-up period that can be removed after redemption (monthly interest payment will be there). This is an affordable investment plan as you can start it even with little capital or investment.

Protects you from high inflation and you get pre-determined monthly interest. With online banking services, you can manage transactions including deposits and withdrawals very easily.

The Post Office Monthly Income Scheme is the best scheme for risk-averse investors who need monthly income. This is beneficial for those who are looking for long-term investments and regular income. For portfolio diversification and for seniors, this is the best plan.

2. Invest in long-term government bonds/gold bonds/securities.

First, let’s understand what are government long-term bonds? These government securities are sovereign or treasury bonds issued by the government to raise funds for infrastructure development, operations, or other spending. The government issues fixed-rate bonds with maturities ranging from a few months to a few years.

At maturity, the principal amount of the bond is returned to the investor with interest earned. It is considered a safe and profitable investment option that gives you guaranteed returns (fixed and variable). Government bonds are considered safe investments because the government is a reliable borrower and is unlikely to default on its debt obligations. This is a good choice compared to term deposits in banks.

Types of government bonds-

Fixed rate bonds, sovereign gold bonds (SGB), inflation index bonds, PSU bonds and zero coupon bonds. These bonds are highly liquid and some of them are traded on stock exchanges, which means you can buy and sell them on the secondary markets.

3. Invest in a monthly income plan mutual fund

A Monthly Income Plan (MIP) is a type of mutual fund investment that primarily invests in debt and equity securities with a mandate to generate cash flow and preserve capital. In this plan, you prefer to receive income or profit from investment in mutual funds at regular intervals rather than reinvest the amount.

Using the SWP (Scheduled Distribution System) is the best alternative to earning regular income through mutual funds. SWP is the opposite of SIP (Systematic Investment Plan), in which you invest in mutual funds in setups. In SIP, you transfer funds from your bank account to your preferred mutual fund scheme, while in SWP, you transfer funds from your mutual fund investment to your bank account. (You could have already invested a lump sum to receive these payouts, which is what you planned with this investment part).

4. Invest in real estate

This is the most traditional yet well-known investment option for recurring returns. You can earn regular income from property rentals. Corporate office, shops, rental space, farmland, general office space are some of the examples of real estate rental income.

In fact, if you don’t have a large amount to invest in such high budget real estate, you can still invest in real estate to earn that regular income. I wonder how? REIT for you. A REIT or real estate investment trust can be described as a company that owns and manages real estate to generate income. Real estate investment trust companies are corporations that manage portfolios of high-value real estate and mortgages. For example, they rent out real estate and collect rent from it. The rent thus collected is then distributed to shareholders in the form of income and dividends.

5. Stocks with a high interest rate

If you have a well-planned portfolio, then you have the “Split” advantage for a consistent source of income. This is a relatively risky choice. Dividends can be an important factor as investors view them as a source of investment income. It’s a driving factor for new investors, and a few years ago, when the stock market wasn’t heavily tech oriented, it was one of the main drivers.

Factors to consider when investing in the highest yielding stocks Yield ratio: A high yield ratio indicates that the company is reinvesting a very small amount back into the business and paying more to shareholders. Hence, always do a deeper analysis of a company’s financial performance before investing. Risk: High yield stocks are generally considered safer than other growth stocks. The reason for this is that when there is a sudden crash or fall in the market, highly profitable stocks do not lose their value.

These stocks also help diversify your risk potential. However, before investing, consider your risk appetite. The Basics: Investing in a company because of its high dividend payout can be fatal to your portfolio in the long run. Hence, it is wise to analyze a company for its fundamentals rather than looking at a high dividend yield. For performance, we can still choose this option up to certain points.

Some of the high dividend paying Nifty 50 stocks 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 planned withdrawal plan that is typically used at retirement, but is not mandatory. A Systematic Withdrawal Plan or SWP is a facility provided to investors to allow them to regularly withdraw a fixed amount from a mutual fund scheme. You can choose the amount and frequency of withdrawals according to your needs, such as monthly, quarterly, semi-annually or annually.

You can also simply withdraw the profit from your investment, keeping the invested capital. On the due date, the units in your portfolio are sold and the funds are transferred to your account.
Why choose SWP?

Work as a permanent source of secondary income Nowadays, an additional source of income is needed to cope with the rising cost of living. Investing in mutual funds and withdrawing funds through SWP is a great way to create a regular source of secondary income. Create your own pension. Whether you have a retirement plan or not, you can build a corpus about 5 years before retirement and invest it in a mutual fund scheme according to your risk tolerance. After you retire, you can create an SWP and create your own retirement.

Protect your capital. If you are strongly opposed to any risks associated with your investments, you may want to invest in arbitrage mutual fund schemes first. These schemes offer guaranteed returns with almost zero risk. You can choose the dividend option and invest dividends in a debt scheme using SIP. After all, you can start an SWP and earn regular income without risking your capital.

7. Corporate deposits

Corporate or company term deposits are term deposits where you invest money for a fixed term at a fixed interest rate. They are offered by non-bank financial companies (NBFC) and other financial institutions. Compared to a regular bank term deposit, they bring a higher interest rate. The maturity of FD companies varies from a few months to several years.

Always keep a few things in mind before investing, such as company history, payment history, and credit score. Some of the leading 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 for corporate deposits – applicable in accordance with the active slab.