Getting salary without working? Isn’t this great? There’s nothing like passive income. What’s passive income? Passive income is the income received on a regular basis with minimum effort required for maintenance.
There are many investments which can fetch a monthly income of Rs 50,000. Some of the popular investments are PPF, FD, EPF and even mutual funds.
To get Rs 50,000 a month, you have to accumulate a sizeable amount. Some of the investments which help you accumulate a sizeable corpus are PPF, Fixed Deposits, Mutual Funds particularly equity mutual funds.
Let’s narrow down two investments. PPF has a lock-in period of 15 years and is an excellent investment for retirement. If you are working very hard in the private sector across working life, there would be a sizeable amount in EPF account.
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What should be the size of FD corpus to get Rs 50,000 a month or Rs 6 Lakhs a year? Let’s say the average FD rate is 7.0% a year. You would require an FD corpus of Rs 85,71,500.
Let’s say you have 25 years to accumulate this amount. You have to accumulate Rs 85.71 Lakhs in 25 years. The average FD rate across this period is 7.0% a year.
You can use IndianMoney.com investment calculator to arrive at the requisite figure.
Fixed Deposit: At an interest rate of 7.0%, you have to invest Rs 1,26,654 at the beginning of each year for 25 years to accumulate Rs 85.71 Lakhs.
SEE ALSO: How To Get Monthly Income
The PPF currently offers 8% for the quarter January – March 2019. The lock-in period is 15 years. The minimum investment is Rs 500 a year and the maximum investment is Rs 1.5 Lakhs a year. PPF enjoys the EEE benefit. The amount you invest enjoys Section 80C benefits up to Rs 1.5 Lakhs a year. The interest earned and the amount withdrawn at maturity is tax free.
Let’s assume that PPF interest rate of 8% remains constant across 25 years. You would have to invest Rs 1,08,563 at 8% for 25 years to accumulate Rs 85,71,500.
Let’s assume that PPF interest rate of 8.5% remains constant across 25 years. You would have to invest Rs 1,00,422 at 8.5% for 25 years to accumulate Rs 85,71,500.
Mutual funds are a pool of investments (collective investment scheme), where you and several investors pool money and invest in a particular asset. This money is managed by a professional fund manager. The corpus is invested in various asset classes like equity (shares), debt (fixed income) or hybrid (a mix of equity + debt) depending on the type of mutual fund.
Benefits of Mutual Funds:
SEBI through its Mutual Fund Advisory Committee has issued ‘new Categorization of Mutual Fund Schemes’. Some mutual fund schemes have been merged, some have been re-named and some have investment portfolio allocation changed.
If you have invested in many mutual fund schemes across fund houses, understand mutual fund schemes changes. If you are new to mutual funds, you might find this a bit tough. You would have to visit different mutual fund websites, to understand the changes. It’s wise to have an online facility to get a consolidated view of mutual fund investments.
See Also: Superannuation Fund
Let’s assume a long-term interest rate of 12% a year. You would have to invest Rs 57,398 in equity mutual funds each year for 25 years to get Rs 85,71,500.
You would have noticed that there’s a lower investment in equity mutual funds compared to PPF or FD. This is because equity mutual funds are known to give higher returns, but at higher risk. However, equity mutual funds are quite safe over a long period of time.
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