Investing a substantial amount of Rs. 1 crore requires a strategic approach, especially if your goal is to generate a consistent monthly income of Rs. 1 lakh. Achieving this goal will depend on choosing the right financial instruments that offer a balance between returns, safety, and liquidity. This article will explore various options and help you identify the best investment plan for monthly income that suits your financial needs. We will also look at how mutual fund investment can be a part of your income-generating strategy.
Understanding the challenge
Before diving into specific options, it’s important to understand that generating Rs. 1 lakh per month means you will need an annual return of Rs. 12 lakh, or a 12% return on Rs. 1 crore. While this may seem like a steep target, there are a few investment options that could help you achieve this with a combination of fixed-income instruments and market-linked investments.
Fixed deposit (FD) for monthly income
Fixed deposits (FDs) are a traditional and secure investment option. However, the returns from FDs have decreased over the years. Currently, most banks offer interest rates ranging between 5% and 7% per annum on FDs. If you invest Rs. 1 crore in a fixed deposit, you can expect to generate an interest of Rs. 5 lakh to Rs. 7 lakh annually, which translates to Rs. 40,000 to Rs. 60,000 monthly.
While FDs are a safe option, they may not be sufficient to generate a monthly income of Rs 1 lakh. However, you can consider them as part of a diversified portfolio to balance risk.
Senior citizen savings scheme (SCSS)
For those over the age of 60, the Senior Citizen Savings Scheme (SCSS) is a good investment option. It offers an interest rate of around 8% per annum. Investing in SCSS can provide stable returns with relatively low risk.
However, SCSS has a maximum investment limit of Rs. 15 lakh per individual, meaning you cannot invest your entire Rs. 1 crore in this scheme. Despite this limitation, SCSS can be a valuable component of your income-generating portfolio if you are a senior citizen.
Real estate investment
Investing in real estate can be another way to generate a monthly income, particularly through rental income. If you purchase property in a high-demand location, you could potentially earn rental income that brings you closer to your Rs. 1 lakh per month target.
However, real estate investments come with certain challenges, including high upfront costs, ongoing maintenance, and the risk of vacancies. Additionally, real estate is not as liquid as other investments, meaning it can be difficult to quickly convert into cash if needed.
Mutual fund investment for monthly income
Mutual fund investment offers various schemes that are designed to generate regular income. The most suitable option for generating monthly income is a Systematic Withdrawal Plan (SWP) in a debt or balanced mutual fund investment. With an SWP, you can withdraw a fixed amount every month, while your principal remains invested.
For example, if you invest Rs. 1 crore in a balanced mutual fund that generates an average annual return of 10%, you can withdraw Rs. 1 lakh every month through an SWP. The key advantage of mutual fund investment is that it offers flexibility and the potential for higher returns compared to fixed-income instruments.
Dividend-paying stocks
Investing in dividend-paying stocks can provide you with regular income in the form of dividends. If you invest in a portfolio of high-quality, blue-chip stocks, you can expect annual dividend yields ranging from 2% to 6%. This means an investment of Rs. 1 crore could generate annual dividends of Rs. 2 lakh to Rs. 6 lakh.
While dividend stocks can offer a steady income, they are subject to market volatility, and there is no guarantee that dividends will be paid consistently. Therefore, dividend stocks should be part of a diversified investment strategy.
Best investment plan for monthly income: Combining strategies
To achieve your goal of generating Rs. 1 lakh in monthly income, you may need to combine several investment strategies. Here’s an example of how you could diversify your Rs. 1 crore investment:
- Fixed deposits: Invest Rs. 30 lakh in FDs, generating Rs. 15,000 to Rs. 20,000 per month.
- SCSS: Invest Rs. 15 lakh in SCSS (if eligible), generating Rs. 10,000 to Rs. 12,000 per month.
- Real estate: Invest Rs. 25 lakh in a property that generates Rs. 25,000 to Rs. 30,000 in monthly rental income.
- Mutual fund investment: Invest Rs. 30 lakh in a balanced mutual fund with an SWP, generating Rs. 30,000 to Rs. 35,000 per month.
By diversifying your investment, you can generate a stable and reliable monthly income while managing risk.
Gilt funds could be another option to consider in your investment mix. These mutual funds invest primarily in government securities, offering stable returns with minimal credit risk. By allocating a portion of your funds to gilt funds, you can benefit from steady, low-risk income, especially suitable for conservative investors aiming to preserve capital.
Conclusion
There are several options for generating a monthly income of Rs. 1 lakh from an investment of Rs. 1 crore. The best investment plan for monthly income will depend on your risk tolerance, financial goals, and time horizon. Fixed deposits, SCSS, real estate, and mutual fund investment can all play a role in creating a diversified portfolio that provides the income you need.
By combining different investment strategies, you can create a balanced and sustainable income stream while ensuring your capital is protected. Whether you are looking for safety or growth, it is important to carefully evaluate your options and seek advice from financial professionals to tailor the best investment plan to meet your needs.