How to Invest 1 Crore for Monthly Income?

Rs.1 Cr Investment Plans for Monthly Income:

Let us now find out the various avenues to park the funds for monthly returns from Rs. 1 Cr:

1. Bank Fixed Deposits:

   Fixed deposits in banks have been one of the most popular investment vehicles, and most Indian households are comfortable with them. In addition to the inherent fund’s safety, you get many schemes for up to 10 years. The monthly income scheme suits investors looking for a steady income stream. However, with the falling interest rates, the income has shrunken considerably. 

2. Retirement Plan:

   An Rs.1 Cr corpus is not created overnight. However, your toil fetches a retirement corpus meticulously planned over a long time during the active working life. The superannuation benefits or wealth created through prudent planning are best invested in a suitable annuity to earn a guaranteed monthly pension for the post-retirement lifetime. 

   There are many available variants in the annuity schemes in the market, but a broad classification is an immediate and deferred annuity. The accumulated retirement corpus payable after 60 years is invested in a suitable annuity compulsorily up to 40% of the corpus even with the NPS scheme. 

3. Bond Investment:

   Various entities issue bonds to fund their business expenses. On the other hand, government bonds are issued by the central and state governments to fund infrastructure development projects. Therefore, they are essentially debt instruments payable after a defined maturity period. The accrued interest is paid monthly, quarterly, half-yearly, or annual frequencies. 

   Therefore, bonds are issued in various flavors and are primarily illiquid till maturity. However, you can trade the bonds in the secondary market in the stock exchange. The upside with bonds is that their coupon rates are higher than the interest paid in banks, and you benefit from a predictable income. While there is a cap of Rs.50 Lac in 54EC capital Gain Bonds, there is no cap on other bonds. 

4. Mutual Funds:

   Mutual Funds have emerged as a popular investment option providing high yields on investment than other deposits, barring shares in the stock market. However, you can enjoy the benefit of choosing mutual funds aligned with your risk profile. For example, while debt funds are low risk, balanced or hybrid funds are moderate risk vehicles. On the other hand, equities are high-risk market investments with the potential to return the highest yield. 

   In addition, Mutual Funds schemes are designed by Asset Management Companies called Fund Houses, creating diverse portfolios holding multiple asset classes. Let us take a closer look at the options:

   • Debt Funds: Low-risk vehicles with portfolios representing treasury bills corporate or government bonds. They are also referred to as fixed-income short-duration bonds. 

   • Balanced Funds: The portfolio is created with nearly 65% carved out from equity asset classes and the remaining in debt assets. While the returns are comparatively higher, these funds fall in the moderate risk category. 

   While the debt funds disburse dividends monthly or quarterly, they may not provide a monthly income stream. Thus, a Systematic Withdrawal Plan (SWP) fulfills the requirement by investing in the growth plan but specifies a fixed amount for monthly payout. In addition, it circumvents the fluctuating dividend payment as they form a profit component and are based on market forces. 

Inflation Risk on Rs.1 Cr Investment for Monthly Income:

Accumulating an Rs.1 Cr nest egg is no mean task, especially with fixed income vehicle interest rates plummeting significantly. While the bank fixed deposit interest rates for senior citizens are hovering between 5 and 6%, the SCSS offers only 7.4%. So in this landscape, how much monthly income is considered enough. An Rs. 1 Cr may appear enough at face value, yielding Rs.52000 in the monthly income fixed deposit scheme. 

With inflation acting incessantly, the monthly income today will not suffice tomorrow. The following illustration considering 6% annual inflation, projects the rising needs over the years. 

• 2019: Rs.50000

• 2024: Rs.66911

• 2029: Rs.89542

• 2034: Rs.1.2 Lac

• 2039: Rs.1.6 Lac

• 2044: Rs. 2.2 Lac

The projection demonstrates a galloping requirement in every five-year block. Thus, it is sensible to plan considering the inflation risk. The following grid provides an alternative but conservative approach.

The combination is a safe retirement plan comprising annuity and fixed income options, free from the volatility of bond and mutual fund markets. 

In Conclusion:

While the Rs.1 Cr corpus looks healthy at first glance, the downward trends in the fixed income investments are squeezing the monthly income volume. Thus, prudent planning and a mix of asset classes aligned with your risk appetite and financial objectives should influence your investment decisions. The best option is derived from spreading the asset allocation in fixed income and market instruments in proportions that will absorb inflationary impact in the long run.

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