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How to Generate Regular Income from Your Investments Introduction
How can you generate regular income from your investments? This is a common question people often ask me. Typically, we think of investments as something that will help us in old age—long-term wealth creation. But what if you want a steady income from those investments today?
In this guide, I’ll explain five different ways you can generate regular income from your investments. I’m not recommending any specific product or company here. These are educational options available in the market, and which option is best for you depends on your individual situation.
Let’s start with fixed deposits (FDs).
When you invest in a fixed deposit, you give your money to the bank, and in return, the bank pays you an interest rate of approximately 4-6% per year. For example, if you invest ₹1 lakh, you will earn around ₹4,000-6,000 annually.
Your principal (₹1 lakh) is safe, and you receive regular interest. This sounds good, but here’s the problem:
Inflation in India averages 6% or more.
After paying taxes on FD interest (around 30%), your effective return is even lower.
This means that the value of your money erodes over time.
FDs are not really an investment product; they are a protection product. They are good for emergency funds, but not for wealth creation.
2. Equity and Mutual Funds (SWP).
The second option is equity and mutual funds.
The stock market can give you good returns, and you can receive regular income through a Systematic Withdrawal Plan (SWP), similar to a SIP (Systematic Investment Plan), but instead of investing monthly, you withdraw a fixed amount monthly.
Example:
You invest ₹1 lakh in a mutual fund at ₹10 per unit. You receive 10,000 units.
You decide to withdraw ₹1,000 every month.
If the NAV remains at ₹10, you sell 100 units every month.
But if the NAV falls to ₹9, you would have to sell 111 units for the same ₹1,000.
This means that when the market is down, your units depreciate faster, and your wealth depletes faster.
SWP works, but since the stock market is volatile, it may not always provide stable income. It’s better to use equity and mutual funds to build wealth over the long term, rather than for short-term income.
3. Real Estate (Rental Income).
Real estate is another way to generate regular rental income through residential or commercial properties.
For example:
If you buy a property worth ₹1 crore and rent it out for ₹3 lakh per year, your rental income will be approximately 3% annually.
Additionally, property values often appreciate at a rate of 5-6% per year.
Overall, you can earn a total return of 7-8% annually, which beats inflation.
However, the problem is that real estate requires a large upfront investment (20-40 lakh or more). Not everyone can afford to buy a property solely for rental income.
Alternatives: REITs (Real Estate Investment Trusts)
If you don’t have a large capital, you can invest in REITs like Embassy, Brookfield, or Mindspace.
REITs allow you to invest in real estate with as little as a few thousand rupees.
They pay you dividends from rental income.
But unlike real estate, you don’t benefit from property price appreciation.
Real estate is a good option if you have the money. Otherwise, REITs are an affordable entry point.
4. Bonds.
Bonds work similarly to fixed deposits (FDs), but typically offer higher returns.
Companies issue bonds to borrow money from investors.
You lend money for a fixed period (usually 1-3 years).
In return, you receive a fixed interest rate (9-11%) and regular payments (quarterly or semi-annually).
Main risk: If the company defaults, you could lose your money. Therefore, you should only invest in bonds rated ‘A’ or higher (avoid bonds rated BBB or lower).
Example: Platforms like Vint Wealth or GoldenPie offer corporate bonds with a 9-11% fixed return. Some even pay principal and interest in installments, reducing risk.
Bonds are safer than stocks and offer stable returns, but always check the company’s rating carefully.
5. P2P Lending & Invoice Discounting.
The last option is peer-to-peer lending and invoice discounting platforms.
Some platforms, like the “12% Club,” promise a guaranteed return of 12%, with daily interest payments and no withdrawal penalties.
If you invest ₹1 lakh, you can earn ₹12,000 a year.
You can also withdraw the money at any time.
Although attractive, the big question is how safe is it?
Such companies lend you money at a high rate (say, 14%), and you get 12%.
But if the borrower defaults, your money is at risk.
This may work in the short term with small amounts, but avoid investing large amounts unless you fully understand the risks.
Conclusion:
So, which option should you choose for regular income?
Fixed Deposit → Best for emergency funds (not investments).
Mutual Funds SWP → Risky for short-term income, better for long-term growth.
Real Estate / REITs → Good option if you have sufficient capital.
Bonds → Safer than stocks, good for stable returns (9–11%).
P2P Lending → High returns but high risk; invest only a small portion.
The key is to diversify. Don’t put all your money in one place. Use FDs for safety, bonds for stability, and real estate/equities for growth. That way, you can enjoy regular income today while also building wealth for the future.
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