How To Invest 25 Lakhs For Monthly Income
Are you looking to invest ₹25 lakhs for a steady stream of income? You’re in the right place.
Whether you’ve received an inheritance or diligently saved over the years, the question remains: how to invest 25 lakhs for monthly income? When invested smartly, ₹25 lakhs can easily give you enough income to manage monthly expenses without constant financial worry.
Various investment options are available today that offer monthly income. In this blog, we will take you through some of them.
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List of Investment Options
A glimpse into all the options we’ll discuss in this blog:
Investment Option | Risk | Return | Tax Saving |
Government Bonds | Risk-free | Varies as per the type of bond | Tax benefits are available only on tax-free bonds |
MIP | Moderate | Varies | No tax benefits |
P2P Lending | Moderate | 15% | No tax benefits |
POMIS | Low | 7.40% | |
SCSS | Low | 8.2% | Up to 1.5 lakh under Section 80C |
Government Bonds
Government bonds are essentially the government borrowing money from the public to fund projects. They are highly secure investments that provide a decent rate of return.
Some of the common bonds include fixed-rate bonds, inflation-indexed bonds, treasury bills, state development loans, and cash management bills. You can buy them from the RBI Retail Direct Portal or through banks.
Pros:
- Highly liquid
- Guaranteed returns
- Long maturity period
- Risk-free
Cons:
- Low returns
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Monthly Income Plans (MIPs)
MIPs, a type of mutual fund investment, are perfect for you if you prefer low to moderate risk. These plans invest primarily in debt funds and a small amount in equity options. There are two types of MIPs: dividend-oriented and growth-oriented.
In dividend-oriented funds, you get income in the form of dividends. In growth-oriented funds, your income is added to the invested amount.
Pros:
- Open-ended
- Low risk
- There is no upper limit for investment
- Professionally managed
- More liquid than other mutual funds
Cons:
- Lower returns than other mutual fund investments
- Market fluctuations
P2P Lending
P2P connects lenders and borrowers directly, cutting out banks as intermediaries.
The question is, how does it work?
Borrowers and lenders register on a P2P platform. Borrowers’ creditworthiness is assessed, considering various factors. Lenders choose whom to lend based on risk and return preferences.
P2P platforms charge fees, regulated by the RBI, but don’t hold onto lenders’ or borrowers’ money.
It’s a convenient way to bridge financing gaps.
You can diversify your portfolio by investing in Peer-to-Peer lending platforms, where you can lend money to individuals or small businesses, earning interest on your investment.
Pros:
- Diversify your portfolio with potentially higher returns.
- Accessibility to a growing alternative investment market.
Cons:
- Limited regulations and platform-dependent risks
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Post Office Monthly Income Scheme (POMIS)
POMIS is perfect for people looking for a fixed monthly income. It is also a low-risk option as it is government-backed. The current interest rate offered on the investments is 7.40%.
You can open an account with ₹1,000 and invest up to ₹9 lakhs in a single account and ₹15 lakhs in a joint account.
Pros:
- Fixed income
- Low risk
- No TDS is applicable
- Allows reinvestment
- Fixed tenure of 5 years
Cons:
- No withdrawals are allowed before one year from the date of deposit
- Penalty on withdrawals before tenure completion
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Senior Citizen Savings Scheme (SCSS)
If you are over 60 years old, SCSS is a great scheme to earn regular income. You can invest up to ₹30 lakhs, with the minimum investment being ₹1,000. The current interest rate is 8.2%.
While the lock-in period is 5 years, you can extend the investment for 3 more years by submitting an application. You can invest in SCSS through any authorized bank or post office.
Pros:
- Tax benefits of up to Rs. 1.5 lakhs
- Low-risk with guaranteed returns
- Tenure can be extended by 3 years
Cons:
- Age limit
- No withdrawals allowed before one year
- Penalty on withdrawals before tenure completion
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Factors to Consider
Some factors you should consider while investing ₹25 lakhs are:
- Risk: Your risk appetite should match the investment options you are choosing. Most of the schemes mentioned here carry low risk.
- Returns: Consider investments that provide guaranteed returns. Guaranteed returns are typically the least affected by market volatility.
- Tax Benefits: Check whether the investment option offers tax benefits. Schemes like the SCSS offer tax savings under Section 80C.
- Safety: Check whether the investment option is regulated or not. Schemes backed by the government (like POMIS and SCSS) are highly safe.
Conclusion
In this blog, we sought to answer the question: Where to invest 25 lakhs? The options discussed here are safe, low-risk, and ideal for monthly income. However, it is best to consider your own financial goals, risk tolerance, and time horizon before making any investment decisions.
Team LenDenClub
LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping investors diversify their investments beyond traditional investment instruments ever since.