Government backed schemes such as post office monthly income plan is very popular among investors. This plan is well suited for investors who cannot take too much risk with their money. By the virtue of being Government backed, they are risk free investment.
You have to invest the money once and get your income every month. If you invest 4.5 lakhs in this scheme, your monthly income will be Rs 3,000. The investment can be used for tax deduction under section 80C within the limit of 1 lakh.
You can visit any of the post offices and start a monthly income scheme.
Banks keep coming up with monthly income schemes.
This is also pretty safe investment as banks rarely go bankrupt, especially large banks. The returns can be anywhere between 6% and 9%. The returns depend on interest rate and hence fluctuation in interest rate can give rise to fluctuation in returns too. Investors should keep an eye on the plans offered by different banks.
There are mutual funds that provide monthly income plan to investors. Mutual funds are riskier than banks' schemes and post office schemes because they invest a part of your investment in equity.
They are conservative in nature and major portion of investment goes towards Government and corporate bonds. This is to ensure that investors are not exposed to high risk of equity investment. These funds do not have a fixed rate of return but they pay dividends. The amount keeps changing based on market situation. Usually the returns are 10%-15% depending on market situation and portfolio.
Monthly income plan is a good alternative to supplement your monthly income from other sources.
The author Pankaj Priyadarshi is a financial consultant and can be reached at email@example.com. He is B.Tech from IIT, Kharagpur and MBA from ISB, Hyderabad. Courtesy:www.investmentyogi.com