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How to Earn Monthly Income

I am 67 years old. I need to invest Rs 1 lakh and get a monthly income from the investment. Can you recommend something? -S. Rajan

I am 67 years old. I need to invest Rs 1 lakh and get a monthly income from the investment. Can you recommend something?
-S. Rajan

Given your age, we think that a government-backed scheme with assured returns and guaranteed safety of capital could be a better choice than a mutual fund. The best option is the Senior Citizen Savings Scheme, which was launched last year. The scheme is meant for those above 60 years of age and offers 9 per cent, which is the highest offered by any assured returns scheme currently. Interest is paid quarterly and the duration is five years.

There's also the Post Office Monthly Income Scheme, which offers an assured 8 per cent plus 10 per cent on maturity (which is at six years), which actually works out effectively to 9.6 per cent p.a.

Given the low interest rates that banks pay nowadays, this is a very good deal. The only catch with these two schemes is limited liquidity. Both offer no way of withdrawing money even in an emergency for the first year. After that, withdrawal is possible, but only at a discount.

If you would also like liquidity, then an MIP run by a mutual fund is the only choice. MIPs invest a large part of their assets in fixed income securities with around 10-20 per cent in equities in order to provide superior returns. You do forego any guarantees on returns or capital safety but MIPs can provide attractive returns. Over the last year, the average returns of the category are 11.2 pr cent. MIPs rated four and five stars by Value Research have earned returns ranging from 10.6 to 16 per cent.

MIPs generally declare dividend every month but can skip them when returns are low.

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