Which long term investments should you bet for fixed income? (2024)

Gautam Kalia, Senior VP and Super Investor at Sharekhan by BNP Paribas

Investors depending on regular income from their investments, generally have low risk appetite and should not go with pure equity schemes for regular income.

Investors should go with Dynamic asset allocation category schemes. This category of schemes invests in equity and debt instruments and change net equity exposure as per the market scenario. As these are hybrid schemes investing in equity and debt instruments, investor should start regular income from these schemes after 1.5 years.

S. Ravi Promoter & Managing Partner, Ravi Rajan & Co. LLP

Investing is about taking calculated risks, not blind bets."

In the financial markets, a few options can generate regular monthly income as a long-term investment strategy.

1.Dividend-paying stocks: Investing in stocks of companies with a history of consistent dividend pay-outs can provide a regular monthly income stream. Dividend yield and the company's financial health are important factors to consider while selecting stocks.

2.Bonds: Government bonds or corporate bonds with a fixed interest rate can provide regular monthly income. It's essential to invest in highly rated bonds to mitigate credit risk.

3.Real Estate Investment Trusts (REITs): REITs invest in income-generating properties and distribute the income to the investors. Investing in REITs can provide a steady monthly income stream.

4.Peer-to-peer lending: Investing in peer-to-peer lending platforms that connect borrowers with investors can generate monthly income in the form of interest payments.

As an investor you must carefully evaluate your risk appetite, financial goals, and market conditions before choosing any investment option. The size of investment also plays a big role and investments made out of borrowed funds can give negative returns.

Abhinav Angirish, Founder, Investonline.in

Given that different investment schemes are designed with different investor types' needs and preferences in mind, it is crucial to grasp the advantages associated with various types of investment strategies. People who are employed and have a regular monthly salary should put money into investments that place a strong emphasis on growth and capital appreciation tactics.

Senior Citizen Saving Scheme, Monthly Income Plans, Post Office Monthly Income Scheme, fixed deposits are some of the options available for regular monthly income, and Systematic Withdrawal Plans (SWP).

Each investor has a different amount available for investment, risk tolerance, expected return, and planned holding duration. Some people make one large investment, while others make smaller, more frequent investments through SIPs (Systematic Investment Plans).

Fund houses offer a wide range of resources and services to satisfy the return and income requirements of various types of investors. A Systematic Withdrawal Plan (SWP) is one such facility where investors get consistent returns on their investment.

The SWP (Systematic Withdrawal Plan) is a feature provided by mutual funds that allows the investor to withdraw a set amount of money from their mutual fund investment at regular intervals (monthly, quarterly, etc.).

How SWP works:

An account is established with the fund house once the investor chooses a mutual fund to invest in.

The investor can decide whether to invest in the mutual fund on a regular basis or in a single payment.

The investor chooses the SWP option and designates the quantity and timing of withdrawals.

The mutual fund sells units of the fund in order to fulfill the investor's withdrawal request, and the investor receives the money in their account.

Until the investor cancels the SWP or the investment value drops to zero, the mutual fund keeps selling units to satisfy the withdrawal request at the predetermined intervals.

The portfolio of assets for generating income and the portfolio of investments for capital growth are extremely different. Although income-generating investments may not be favored by the vast majority of investors because they do not yield high returns, they do guarantee a consistent income in the future.

Vineet Agrawal - Co-Founder – Jiraaf

When it comes to the supplementary source of income, investors have traditionally looked at commercial and residential real estate rental incomes, bonds, and dividend stocks. However, with the democratization of investment opportunities available via new age digital platforms, investors now have additional options to diversify in the form of alternative fixed income debt products such as unlisted corporate bonds, startup venture debt, asset-leasing, and real estate debt opportunities that provide competitive returns that beat inflation plus the benefit of steady defined repayments. These products have varied tenures plus the aspect of regular periodic fixed repayments make it a great portfolio addition for investors.

Suman Bannerjee, CIO, Hedonova

Some of the best long-term investments that can generate regular monthly income include:

• Rental income from real estate properties
• Dividend-paying stocks
• Fixed Deposits with a monthly interest payout option
• Mutual Funds with Systematic Withdrawal Plans.
• Post Office Monthly Income Scheme (POMIS)
• Mutual Funds with Systematic Withdrawal Plans.
• Corporate Deposits.
• Senior Citizen Savings Scheme.
• Long-Term Government Bonds.

It is important to note that these investments come with their own risks and investors should do their due diligence before investing.

Aniruddha Bose, Chief Business Officer, FinEdge

A well thought out Mutual Fund SWP (Systematic Withdrawal Plan) strategy works best when it comes to generating regular monthly income. Instead of opting for the IDCW option (previously known as “dividend payout") which is unpredictable and tax inefficient, you could create an “artificial" dividend by starting a monthly SWP from your portfolio.

Even within your income generation portfolio, you should allocate 30% - 40% of your investments to growth assets that you can hold on to for 5-7 years, thereby mitigating the risk of exhausting your income generation capital too quickly. All in all, a prudent balance between capital preservation, systematic withdrawals and growth is a much better idea compared to blindly putting money away in interest bearing assets like bonds and FD’s. A competent advisor can prove invaluable in drafting and executing such an income generation strategy.

Prateek Toshniwal, Serial Investor, Financial Advisor and Co-Founder of IVY Growth Associates (India) | MI Capital (UAE)

Satyen Kothari, the founder and CEO of Cube Wealth

Long-term investments that can generate regular monthly income include dividend stocks, rental properties, bonds, real estate investment trusts (REITs), peer-to-peer (P2P) lending, annuities, and dividend-focused mutual funds or ETFs. Dividend-paying stocks, rental properties, and REITs can provide monthly income in the form of dividends or rental payments. Bonds and P2P lending can generate regular interest payments, while annuities offer guaranteed monthly income for a specified period or for life.

Dividend-focused mutual funds or ETFs can also provide regular monthly income. It's important to consider the risks and conduct thorough research before making any investment decisions. Tax implications should also be taken into account. Consulting with a Cube Wealth Coach or qualified financial advisor can help ensure that these investments align with your financial goals and risk tolerance.

Sunil Sood, Chief Business Officer, Executive Education, TimesPro

An overlooked yet wise and crucial investment strategy could be upskilling constantly. Whether it is through opening up higher-paying positions, or taking an entrepreneurial plunge, upskilling yourself can increase your value in the job market. At the same time, new skills can help you transition to emerging, well-paying fields.

Professionals who continuously upskill and reskill themselves are more likely to earn higher salaries and have greater job security than those who do not. While it’s not a quick fix, for those who are willing to put in the work, quality upskilling can be a valuable long-term investment that pays off in the form of higher salaries, more opportunities, and sustainable growth.

Vinita Idnani, Partner, Capital League

When it comes to long-term investments depending on the tax bracket of the investor one can consider Tax Free Bonds, Corporate Fixed Deposits, Equity Savings Fund or Hybrid funds (erstwhile MIPs). Additionally with the help of a Financial advisor, one can create a plan with asset allocation to Debt & equity Mutual funds and a regular income can be provided by running a systematic withdrawal plan.

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Published: 18 Apr 2023, 04:07 PM IST