Monthly income generation through investments is highly tricky. MIPs are expensive if guaranteed and are not enough to meet expenses and if there are market components like equity for higher returns, cash flows can be volatile.
The approach to generating monthly income is more efficient if a mix of assets that have regular cash flows are held in a portfolio. The assets could be any asset that generates cash flows on regular basis. The underlying premise is that cash flows should accrue monthly from at least one asset in the portfolio and if there are 12 assets for example, then the 12 months of the calendar year is covered.
Assets that generate constant steady cash flows
The assets that generate constant steady cash slows include fixed deposits, bonds, high cash flow generating cash rich and dividend paying stocks, InvITs, ReITs and residential or commercial properties.
Fixed deposits and bonds can give the portfolio regular cash flows as well as provide both liquidity and stability to the portfolio. High cash generating, cash rich dividend paying stocks will give both regular dividend income and also long-term capital appreciation though there could be short term volatility. Rental income is good but assets are expensive, costly to transact and are illiquid. InvITs and Reits can offer better alternative to owning physical assets.
Portfolio mix of cash generating assets to get monthly income
A portfolio can be constructed comprising of fixed deposits, bonds, stocks, InvITs, and ReITs to provide monthly cash flow. It is not necessary that each asset should generate monthly cash flows. The mix itself should cover cash flows for each month of the year.
Bonds can even be structured in a way that there are frequent cash flows plus maturities that can cover certain months of the year where more cash is required. Fixed deposits, bonds, InvITs and Reits can take care of emergency liquidity in the short term while long term capital gains from stocks can take care of portfolio returns and liquidity requirements.
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