Thinking of investing for monthly income? Keep certain things in mind.
15-Sep-2022
We believe one must keep certain considerations in mind when planning to derive regular income from an accumulated corpus.
Keep annual withdrawals around 4-6 per cent
Anyone who is planning to derive a regular income from investments must note that one's annual withdrawals should not exceed 4-6 per cent of the total corpus.
Implementing the same rule, and keeping 4 per cent as the withdrawal rate (to be on the conservative side), one would need a corpus of Rs 3 crore for deriving a monthly income of Rs 1 lakh, starting today.
Don't consume all the returns
It must be noted that the worth of Rs 1 lakh today, may not be the same after a few years. That is because of inflation. Therefore, in the future, one would need much more than Rs 1 lakh to meet their actual expenses. That is why one mustn't consume all the returns generated from the invested corpus during the year. A part of them must be retained so that the corpus continues to grow and provides inflation-adjusted income during the later years.
For instance, if you have earned an annual return of 8 per cent (Rs 24 lakh on a corpus of Rs 3 crore), you should consume only 4 per cent (Rs 12 lakh of Rs 24 lakh earned) for your expenses. Letting the remaining Rs 12 lakh invested will help in growing your corpus. That is because, after a few years, you may need more than Rs 1 lakh a month for your expenses and for that, you would need a higher corpus than what you have today.
Invest in equities to grow your corpus
It is generally advised that one must allocate at least one-third of their portfolio to equities since it is the only asset class which not only has the potential to deliver higher inflation-adjusted returns but also helps grow your corpus over the long term.
Do you want to know which mutual funds to invest in to get inflation-beating returns? Don't sweat. Value Research Portfolio Planner gives you a list of suggested funds that can provide steady returns, better than the traditional options.
Suggested read: The ultimate portfolio for a retiree
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