How to earn regular income from Mutual Funds ?

You can earn regular income from Mutual Funds in following three ways:

1. MONTHLY INCOME PLANS (MIP)

By investing in MIP mutual funds, you can create a regular stream of income for yourself. These mutual funds are actually debt or hybrid funds with an option of monthly dividend payout. Most of these funds are conservative in nature and involve only 10-20% investment in equity while the rest 80-90% are invested in safer debt instruments.

Though they cannot provide very spectacular returns due to a limited exposure to equity, they are usually good enough to provide inflation-beating income to the investors. These schemes are popularly viewed as an alternative to other fixed income bearing instruments such as Fixed Deposits (FDs), Public Provident Fund (PPF) etc.

Additionally, MIP mutual funds also score over fixed deposits from the taxation point of view. 

The perfect blend of risk and reward makes an MIP scheme a feasible investment option for the retirees who have a limited source of steady income. 

2. SYSTEMATIC WITHDRAWAL PLAN (SWP)

Another way to ensure a regular flow of income from mutual funds is through a Systematic Withdrawal Plan (SWP). Similar to the Systematic Investment Plan (SIP) which allows the investors to invest periodically in mutual funds, SWP empowers them to withdraw a specific amount of money at fixed intervals of time.

For example, you can choose set-up a SWP to withdraw Rs. 15,000 from your pool of mutual fund investments on 10th of every month for the next five years. As per the Net Asset Value (NAV) of each unit on the pre-determined date (10th of every month in this case), a number of mutual fund units amounting to Rs. 15,000 will be redeemed and the proceeds credited to your bank account.

3. Dividend payout option:

In the ‘dividend payout’ option, dividends are declared and paid out to you. This option is suitable for investors who need regular income from their mutual funds. The fund declares dividends out of profits. A fund can pay dividends only out of profits and not out of capital. 

Looking for other ways to earn regular income ? As Financial Planners, we are here to help you. Contact us at 9460825477