Introduction to Monthly Investment Plans
For most people in India, investing is the last option. It is a by-product of saving if there is one in a particular month.
Though people traditionally invest in insurance policies, they do not follow a habit of disciplined investing.
Many government schemes have been in place keeping in mind this aspect – to help people develop a habit of saving. Depending on the schemes you go for and your income bracket and age, you can also earn a tax deduction.
Thus, monthly investment plans are a great way to develop a continuous habit of investing. From students to new jobbers to senior citizens, everyone wants to at least follow some simple investing method with a low budget. Let us look at various such schemes.
- Recurring deposit – A simple and effective tool where you can invest a small fixed amount each month into the bank and keep earning interest till a maturity period. You can also open an RD in a post office with Rs 100. An RD is a good alternative to an FD where you need to deposit a large amount. With an RD you can earmark a specific fixed sum of money to fund your recurring deposit. The interest earned is slightly less than in an FD because each deposit a month lesser than the previous to earn interest.
- Senior Citizen Saving Scheme – This is a government-backed scheme where you can earn up to 7.4% per annum (as per Sep-Dec 2020 interest rate announcement). You can start with a minimum amount of Rs 1000. The senior citizen scheme allows you to invest a maximum of Rs 15 lakhs till a period of five years post which it matures unless you seek an extension of three years.
- Mutual Fund SIP – These are minimum contributions of Rs 500 in each fund you choose to invest in. Some new funds now also allow a monthly investment of Rs 100. You can choose funds from equity-oriented to balanced and debt-oriented funds. Each type of fund is useful to meet the financial goals of different time horizons.
- Systematic Deposit Plan – The Systematic Deposit Plan is a scheme from Bajaj Finance which comes in for a period between 12 months to 60 months. The depositor can invest in the scheme by investing a minimum deposit of Rs 5,000 monthly, at the prevailing interest rates. This is a good plan to invest if you are unsure of how many periods you can invest. Each deposit is regarded as a new FD. You can easily earn 6.85% as a senior citizen for five years.
- Corporate FDs – Laddering corporate FDs entails the creation of small FDs (monthly or quarterly) to create a stream of FDs across the year. These build up into a continuous ladder of maturities each month and can be a great way to receive a monthly income. You can do this with a high paying company FD such as Bajaj Finance FD which will pay you 1-2% higher than banks. Currently, it offers interest rates up to 6.85% along with the assurance of guaranteed returns backed by CRISIL and ICRA ratings. Use the FD calculator to understand the interest rate returns with different combinations of tenor and capital.
You can always start investing in these options with a small amount and increase each month as your saving habit improves.
This will not help build a corpus over a period of time but also help you build an investing habit which will help you curtail excess spending.
Investing in small amounts each month helps you compound the money over a period of 10-15 years and enable you to meet financial goals.
Simple monthly income investments will also help in building an emergency fund and slowly into capital assets which will help earn income.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.