Are returns guaranteed with monthly investment plans?

In most cases, returns are assured with monthly investment plans, although the actual rate of return can differ significantly between different investment options.

What tax benefits are available with monthly investment plans?

While most monthly investment plans do not offer tax benefits, certain schemes like the Senior Citizenâs Savings Scheme provide tax deductions on investments up to Rs. 1.5 lakh under section 80C of the Income Tax Act.

Why should I consider investing in a monthly investment plan?

Investing in a monthly investment plan offers several advantages, including disciplined savings, guaranteed returns, and a steady income stream. These benefits make these schemes worth considering for investors.

Can I use my monthly investment plan as collateral for a loan?

Not all monthly investment plans allow you to take out a loan. However, some Fixed Deposit Monthly Income plans do offer this option, although the loan amount and interest rates can vary depending on the bank or financial institution.

Monthly Investment Plan

Monthly Investment Plans are financial products where investors contribute a fixed amount of money on a monthly basis towards various investment avenues. These plans are designed to provide investors with a disciplined approach to wealth creation by spreading their investments over time, thereby reducing the impact of market volatility and benefiting from rupee-cost averaging.

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What are Monthly Investment Plans?

Monthly Investment Plans (MIPs) are investment schemes designed to provide investors with a steady income stream, typically paid out monthly. Here's a breakdown based on the context you provided:

How Do the Best Monthly Investment Plans Work?

You invest money regularly through monthly contributions.
These contributions accumulate over time.
The monthly investment plans pay you a set amount or a portion of the accumulated amount each month.

Benefits:

Regular Income: They target retirees or those seeking a predictable monthly income.
Hassle-free: Regular investments and payouts can simplify financial management.

Best Monthly Investment Plans

There are several investment avenues worth considering when it comes to securing your financial future and generating a consistent monthly income. Some of the best monthly investment plans available in India are:

Systematic Investment Plans (SIPs):

SIPs are a powerful way to invest in insurance and mutual funds. With SIPs, you invest a fixed amount at regular intervals. This builds discipline, averages out market fluctuations (rupee-cost averaging), and allows you to benefit from potential long-term growth. SIPs can be invested in various funds that cater to different risk appetites, offering flexibility. You can also use the SIP calculator to calculate returns on your SIP investments.
Fixed Deposits (FDs):

Fixed Deposits are a traditional saving option offered by banks and financial institutions. You invest a lump sum for a fixed tenure and receive a predetermined interest rate payout at maturity or periodically throughout the term. FDs are known for their safety and guaranteed returns and are one of the safest and best investment options.
Senior Citizen Saving Scheme (SCSS):

Specifically designed for senior citizens aged 60 and above, SCSS offers a reliable investment option with an attractive annual interest rate of 8.2%. The government-backed scheme accommodates minimum investments ranging from Rs. 1000 to Rs. 30 lakh. and provides weekly payouts over a five-year period. However, it's important to note that the interest earned is taxable.
Post Office Monthly Income Scheme (POMIS):

POMIS, offered by India Post, is ideal for risk-averse investors seeking regular income. With an annual interest rate of 7.4%, payable monthly, and a deposit period of five years, this government-backed scheme allows individuals to invest up to Rs 9,00,000. Joint accounts have a higher investment limit of Rs 15,00,000, making it one of the best monthly investment plans.
Monthly Income Plans (MIP):

Mutual funds offering Monthly Income Plans allocate a majority of their assets to fixed-income instruments and a smaller portion to equities. Investors receive consistent income based on the fund's performance, making it suitable for those looking for steady returns. However, monthly income plans come with different levels of risk, so determining your risk tolerance is important before investing.
Pradhan Mantri Vaya Vandana Yojana:

Specifically customised for senior citizens, this scheme offers stable income with fixed interest rates starting at 7.4% annually. With a policy term of 10 years and multiple payment modes, it provides financial security to retirees through regular annuity payments.
Annuity Plans:

Indian insurance companies offer annuity plans that guarantee a consistent income stream at a lower risk. Whether opting for immediate or deferred annuities, investors can generate regular income by investing a lump sum amount. It is the best monthly investment plan for people looking to retire comfortably.
Systematic Withdrawal Plans (SWP):

Systematic Withdrawal Plans allow investors to withdraw a fixed amount regularly from their investments. This systematic approach ensures a steady income while providing flexibility based on individual requirements.
Equity Share Dividends:

While high-risk, equity share dividends can provide both regular income and long-term investment gains. Diversifying your portfolio with dividend-paying stocks can enhance the likelihood of consistent payouts.
Long-Term Government Bonds:

Ideal for risk-averse investors, long-term government bonds offer stability and predictable returns. These bonds are issued by the Indian government, which is why they are considered one of the best monthly income plans. They come with a maturity period ranging from 5 to 40 years. What makes them attractive is their monthly interest payments or coupon payments, providing a steady income stream.
Corporate Deposits:

Corporate deposits can be an excellent choice for investors seeking higher returns than traditional bank deposits. Offered by non-banking financial firms (NBFCs) and housing finance companies (HFCs), these deposits come with higher interest rates and added flexibility. However, unlike bank deposits, they carry a higher level of risk. Before investing, thorough research into the financial health and reputation of the issuing NBFCs is important to avoid risks.

Benefits of the Best Monthly Investment Plans

Below are the benefits of monthly investment plans:

Regular Payouts: Monthly investment plans offer a steady flow of income. This is a major advantage, especially for retirees seeking to replace their regular salary.
Planning Advantage: This predictable income stream allows for easier budgeting and financial planning, especially in your golden years.
Power of Compounding: Many monthly investment plans invest in a mix of stocks and bonds. The stock portion offers the potential for capital appreciation over time. When these returns are reinvested, they can significantly grow investments.
Outpace Inflation: The best monthly investment plans have the potential to offer higher returns, helping you maintain purchasing power in the long run.
Habit Building: Monthly investment plans often involve setting up automatic monthly contributions. This builds a disciplined savings habit, which is important for achieving long-term financial goals.
SIP Advantage: Some monthly investment plans allow you to invest through the SIP method. This enables you to start with smaller amounts and gradually increase your contributions as your income grows.

Conclusion

The best monthly investment plans offer great investment opportunities for individuals seeking a balance between income generation and potential growth. They provide a steady income stream, particularly valuable for retirement planning while offering the chance to outpace inflation through compounded returns. It’s important to carefully consider your risk tolerance and financial goals when deciding if monthly investment plans are the right fit for you.

Disclaimer: This article is intended solely for educational purposes and does not constitute financial or investment advice. Any securities or investments mentioned herein are for informational purposes only and should not be construed as recommendations to buy, sell, or hold any financial instrument. Readers are encouraged to conduct their own research and consult with a qualified financial advisor before making any investment decisions.

FAQs

Are returns guaranteed with monthly investment plans?

In most cases, returns are assured with monthly investment plans, although the actual rate of return can differ significantly between different investment options.
What tax benefits are available with monthly investment plans?

While most monthly investment plans do not offer tax benefits, certain schemes like the Senior Citizen’s Savings Scheme provide tax deductions on investments up to Rs. 1.5 lakh under section 80C of the Income Tax Act.
Why should I consider investing in a monthly investment plan?

Investing in a monthly investment plan offers several advantages, including disciplined savings, guaranteed returns, and a steady income stream. These benefits make these schemes worth considering for investors.
Can I use my monthly investment plan as collateral for a loan?

Not all monthly investment plans allow you to take out a loan. However, some Fixed Deposit Monthly Income plans do offer this option, although the loan amount and interest rates can vary depending on the bank or financial institution.

Past 5 Year annualised returns as on 01-10-2024

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.