How to invest for Regular Income?

Every person who wishes to create a regular income for himself and his family faces the following questions:

  • Whether he should invest in a safe Debt/ Interest bearing Instruments/ Securities, where he gets a steady regular income for a few years or to put some part of the investible money in Equities for long term growth of his capital.
  • For how many years the regular income is fixed and thereafter what is the reinvestment risk in light of the interest rates coming down in recent years.
  • What is the impact of Taxation on his investment and what will be the net after tax return on his portfolio.
  • What is the liquidity available in his investments and if there is a need for some sudden money, whether it can be encashed.
  • Whether he has other sources of income like pension / Rent etc, and how reliable these sources of income are in the foreseeable future.
  • Whether to invest in traditional saving instruments like Fixed Deposits, Postal Schemes, Government Bonds and Corporate Fixed Deposits or to invest in Debt Mutual Funds and some amount in Equity Mutual Funds.
  • What will be the effect of inflation on his regular income and his investments.
  • The biggest question is how long will the investment corpus last and whether he will outlive his investments.
  • Whether a person would like to mostly consume his investments in his lifetime or would like to leave some “Accumulated Wealth“ for his next generation and his loved ones.

To answer the above questions:
The investment portfolio which is created for generating regular income should have the following ingredients:

  • Investments should be tax efficient
  • There should be an emergency fund and a health corpus for unforeseen expenses
  • It should have investment in Debt for regular income and some investment in Equities so that the investments offset the impact of inflation in the long run and continue to provide adequate income for lifestyle expenses.
  • The investment portfolio should be reasonably liquid.
  • All of the above can be achieved with the help of right “Asset Allocation “
  • Each person has different circumstances so one “Asset Allocation” mix is not suitable to all, hence do not hesitate to take advice of experts to achieve your required “ Asset Allocation”.