10 different ways of generating regular income

Do you want to generate regular income for yourself by investing a lump sum amount in some financial product ? It can be because of any reason like retirement , unstable income from job/business or just wanting to have your own income flow. In this article we will see 10 different ways of creating regular income in India our of which 5 will be safe methods and 5 would be risky (hence chance of high income) .

Income Generation

5 Safe Ways

Below are 5 safe way of generating income , in which the principal and the return are almost assured . It’s suggested for those investors who can not take any risk in their financial life .

1. Post office Monthly Income Scheme

One can invest a lump sum amount in POMIS and get monthly income for next 6 yrs. The return one can get is around 8% and the income can be given in form of monthly interest for next 6 yrs. One will get back his principal amount along with a  5% bonus at the end. One can invest only upto 4.5 lacs for an individual account and 9 lacs in a joint account.

2. Monthly interest from Fixed deposits

The most famous option is to open a fixed deposit with monthly interest payment. This is simple and one of the safest option one can take . the interest rate will depend on the tenure for which you open the Fixed deposit. One can expect a interest of around 7-8% . The interest income is taxable.

3. Annuity from Insurance companies

One can also buy annuity plans from LIC or pvt insurance companies. The returns on these plans will depend on the pension tenure and which option you have taken while buying the product (return of principal amount or not). The return of these plans are very low and sometimes not even known in advance like in case of NPS . One should get into this only if you are not capable of doing anything else with your money

4. Govt long-term bonds

One can buy long-term govt bonds with maturity of around 25-30 yrs and paying a half-yearly interest at around 8% (this varies from time to time). These are real long-term bonds and at the end of the tenure you get back your principal amount . These bonds are govt way of raising money for public and you can consider these bonds as one of the safest instruments. These bonds are also tradable in secondary market, so you can also sell them if you want to get rid of them.

5. Senior citizen Saving Scheme

One of the best option for senior citizens above 60 yrs of age is to put their money in senior citizens saving scheme and get interest of 9% per year which is payable quarterly. SCSS is only for 5 yrs after which they mature, they are extendable by 3 more year after that. Note that even investors in age group of 55-60 can invest in SCSS, provided they have opted for VRS (voluntary retirement scheme) and the funds are coming from their retirement benefit.

5 Risky Ways

Now we will discuss 5 risky ways of generating income, these options have some risks like fluctuations in your assets pricing and volatility in the income , but for this reason one might end up with much superior returns and high income compared to safe options . It’s suggested for those investors who are more pro investors and are ready to take high risk.

6. SWP from Mutual funds

One can invest in Equity mutual funds or debt mutual funds and opt for a SWP (systematic withdrawal plan) which will liquidate a fixed number of units or portion out of mutual funds and credit it to your bank account. This is reverse of SIP and can be one of the ways of generating an income. Note that SWP might attract exit load if started immediately , so its better to start a SWP after a year or two. Note that the investments in mutual funds might be volatile if it’s a equity mutual funds. If one does not want too much of volatility , better invest in debt funds.

7. Monthly Income plans of Mutual funds

There are mutual funds which are of category Monthly income plans (MIP). These mutual funds have inbuilt structure of providing regular income (not always montly, purely depends on dividend declaration) . These MIP’s can be little volatile as they have a little part in equity also. The dividends are tax-free in hands of investors.

8. Dividends from Equity shares

If you are a stock lover, you can invest in long-term stocks which have good enough dividend paying history. Note that in this way the income is not always guaranteed through dividends, but if you diversify your investments across 10-12 stocks , then you can be assured that there will be regular flow of dividends from some of the other stocks. Also the actual value of your investments can fluctuate as it’s a risky investments . But for people who understand stock markets and are patient with their investments , it can be a good option.

9. Dividend from mutual funds

For those who cannot invest in equity directly ,they can opt for long-term mutual funds with dividend payout option , this will make sure they get a dividend income from mutual funds , but that will happen only once a year . It wont be a monthly payout . One should diversify across 3-4 funds to make sure the dividends are coming from different funds.

10. Rent from Real estate

One can also invest in real estate and generate an income through the rental income. While the value of property will appreciate , one will also get a regular income, but understand that this is high maintenance option and you will have to keep on monitoring your asset. There are risks like not getting good tenants and not getting right tenants for months . It’s best to take a property in the middle of city which would be in demand rather than outskirts .

Which of these options was yours favorite ? Can you suggest more ways of creating regular/irregular income in India

76 CommentsAdd Comment

  1. astrosunil

    I would like to bring out one incident happened in my home town – Hubli banks, where my dad had invested most of his savings. they were giving 14 – 15% interest of FD’s & hence attracted lot of investors. later these banks went bankrupt & acquired later by other banks. the money was stuck & later only principal was given after many years. So the same old principle of diversification also applies when it comes to retirement planning as well. get returns from several sources rather than only one in your retirement period.

  2. Ramakant Bhosle

    Hello Manish,

    Many thanks for your informative articles on Personal finance and Planning. I am retiring this month at the age of 58 years and will get around 40L through PF and Gratuity. Kindly advise me some reliable investment plans in order to get regular monthly income post my retirement (other than income from House Property). Thank you in advance.

    With best regards,
    Ramakant

  3. Deepak

    Hi Manish,

    This article is eye-opener, i am glad that i was able to read this. I am 32 years old & now planning to invest in PPF, intially 60k per year & then increment of 15-20 % per year. In addion to this, i want to get life insurance policy which can give life coverage & some returns post maturity. Please suggest few options.

    Thanks

  4. Ramesh

    Hello Manish,

    Thanks for your excellent blogs on financial planning. I am retiring this year at the age of 58 years and will get around 35L through PF/Gratuity. Kindly suggest me some good investment plans to get regular monthly income (Approx. 25K) also big chunks of money on other deposits.

    Warm Regards,
    Ramesh

    • If you want 25k per month and want it to be linked with the inflation (so that you can increase your monthly drawings each year. you would need a good enough amount like 65-75 lacs . Only then in real way you will be able to create a inflation linked pension . The best thing would be a combination of FD’s and rental income !

  5. vimal

    once again great article thankyou ..

    i have one doubt regarding real estate ….

    which is more sensible to own a flat or to own an equalent value land or to own a fixed depost at 9 %pa ?

    in my home town kochi…. we have an extra flat value currently stands at 50+ L …
    if we give flat to rent in current circumstances we can get a return of 12,000 – 18,000 tops… proposed metro station is close to it and after 3 years when metro work is done i hope there will be consistant demand and i hope prices will go up …

    is it wiser to sell the flat immediately and invest in POMIS and MIP and mutual fund worth 50L and get 35,000 per month ??

    thanks in advance :)

    or is it wise to invest 50 L on property or another upcoming flat who jus started project ?????

  6. Chandra Mohan

    Hi Manish wonderful article. Thanks for updating investors knowledge like me. I am in Doha and would like to know if you can suggest Financial Advisor. Thanks Chandra.

    • Chandra

      there are lot of advisors today .. can you tell me what exactly are you looking for , If you are fine with online financial planning , then we are also one option, you can see what we provide at jagoinvestor.com/services .

  7. sachin

    Please tell me best 5 MF for SIP 1000/month in each for next 5 years
    Also best 5 shares for long term investment atleast for 5 yrs i can invest it in lumpsum 1 lac i.e. 20k each.

    please reply

  8. Ankit

    Hi Manish

    First up, congrats on your fantastic blog. I must say I have learnt a lot from it.

    I have a seemingly unrelated question here..
    I was looking at the past performance of “DSP Blackrock Top 100 Equity fund” (G). What got me wondering is that I find its performance not too bad relative to most large cap funds. But it has a CRISIL rating of “average buy”. What I want to know is, what is it that they see as trouble with this fund (and hence if I should be wary if this fund “.

    Now the relation to this present post – I am trying to build a portfolio for my parents. In that, I want to keep about 40% in large cap equity fund, for capital appreciation. And rest in debt with monthly interest feature.

    That is all the more reason that I choose a correct large cap fund. Would appreciate any help in this regard

    • Ankit

      All I would say is dont think too much about ratings here .. ratings is too complicated and involves a lot of factor from the rating agency . Use ratings only as filtering mechanism and not a selection machanism

      Manish

  9. Prashanth

    Manish,

    You are doing a great Job. If people follow your investment. They can save themselves a lot of trouble/agony of being fooled by any selfish agent. No agent recommeds Term Plan because it provides the least incentive to them. Keep up the good job. Regular investments is the best and only safe way to create wealth. You can start with as less as Rs.100.

    Prashanth

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