Monthly income streams

Suppose one has say 3 Cr to invest and objective is to generate monthly income with annual yield of 9-10%. Where would one invest such amount by diversifying the amount.

How would you allocate the amount and to what categories to achieve the objectives.

  1. FD
  2. Bonds
  3. Alternatives to FD like invoice discounting, grip , growpital…etc
  4. Debt MFs

Please note we aim to achieve

  1. Monthly/Quaterly income.
  2. Average Annual returns between 9-10%. No more no less.
  3. Investing ONLY , no trading.
  4. Income Taxes need not be considered.

Please provide your suggestions.

Thank you.

ok… probably you need to contact fee only financial planner.

From debt instruments, getting minimum 9% yield means you might have put some portion of money in low credit rating assets OR in unproven assets. How much % of money you are willing to put in such assets is what you have think upon

In general (not necessarily every time) risk or volatility increases as expectations of yield increases.
There are ways to reduce volatility for given risk e,g. diversification as explained by @Bhuvan

if you wish, once you finalize you can share your strategy here. It will help community. :slightly_smiling_face:

My current thought process

  1. 1 Cr in FD @ 7%
  2. 1.5 Cr in Corporate and State Gov Bonds earning average yield of 10%. This includes only monthly/quarterly incomes bonds and spread across 10-12 Bonds from different corporates and State Gov. This includes only Secured Senior Bonds. Amount is diversified to reduce the risk.
  3. 0.5 Cr in Invoice discounting earning @ 10.5%. Here too amount is diversified with different companies. Principal + interest is returned every quarter. take out interest and invests principal every quarter.

All of this adds to average annual yield of 9%.

Can one do better to reduce risks and keep returns above FD rates?

What is the duration you are considering for this?
For short term this might work, but this plan ignores re-investment risk.

So for 2-3 years this plan is ok, but as interest rate softens, yields will go down, and since you have invested all your money in short term instruments, reinvesting the principal again at same rates would be difficult.

Frankly, expecting 9-10% from any debt instruments over a long term is misleading.


Yes, i m aware of all that you have mentioned.

I m investing in debt now to lock in the high interest rates. I m expecting rates to go down in the next quarters.

After 2-3 yrs , I will rebalance and see what opportunities present itself.

Mostly likely , I will again go back to stocks when interest rates are low. ride the bull and then back again to debt when interest rates go up again. Rinse and repeat.

All i wanted to know is if i could do any better now.

Thank you for your input.



And just to add, instruments offering greater than FD returns will also carry other risks like default etc.

A. My advice would be to taper the expectations down to 7-7.25% annual returns. And if that’s possible, just invest the entire amount in GSecs with a maturity matching your needs. 30yr govt bond is currently offering 7.3% yield.

B. In case the returns have to be 9-10%, I’d follow the same steps in A, and then pledge the bonds to write weekly farthest OTM call options to cover the 2-3% shortfall.

There’s a trade off involved either way but that’s life I guess.

PS: would personally prefer A over B


Umm, that’s what I am trying to explain that by investing in 1 year FD, or invoice discounting products (which are typically few month maturity) you are not locking interest rate.

Okk, so your investment objective is NOT to generate monthly income (which is generally done when you need fixed amount for long duration of time) but actually is to park money for short term till you can decide what else can be done with you money. Fair enough.

That is frankly personal choice, but there are ample amount of bonds currently available in 10-11% range from known companies like edelweiss, NAVI finserve etc. Are they 100% safe? mostly no, but I would still think they are safer then something exotic like invoice discounting.

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if you see my allocation. Most of it is in bonds. The FD/invoice discounting is just to diversify. But mostly bonds to lock in the interest rate.

Since maturity is 3 months in invoice discounting. I can always move it to bonds if required. But invoice discounts does give a high rates similar to bonds. But its not regulated like bonds and there is the risk in both assets.

Besides bonds/FD , what other options do we have for generating monthly income, right?

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no …however checked yields on goldenpi
AAA bonds yield around 8%
AA bonds yield around 10 %
A bonds yield around 11 %
BB bonds yield around 12%
not very sure how indicative todays display is, but even with Secured Senior Bonds I think there would be struggle to reach 10% average safely.

if you are open to take withdrawal decision every month, one out of box suggestion : Invest say around 10-15% in index fund/hybrid fund. Withdraw only in month/quarter if there is upward jump in NAV. Do not withdraw in month when index moves sideways or goes down. This will ensure capital in index fund is protected but income stream is not guaranteed.
Generally speaking over period of 5 years, I am sure you will find enough instances to withdraw money with effective rate > 10% and still protect the invested capital at the cost of uncertainty of monthly income stream (from this allocation)

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I already have funds invested in equity MF. The average XIRR comes to around 20% for small caps and 10-15% for mid and large caps.

I m 100% sure that bonds that give 10% and above will struggle and one small recession like situation and they are deep trouble. only way to minimise is diversify it even if you are an aggressive risk taker.

I do not like to take monthly withdrawals from equity MF or stocks. reasons are obvious. Dividends may be , but even they are not consistent.

I m not looking to get more than 10%. I m expecting anywhere from 8-10% for monthly returns and i know that i have to take some risks to get that kind of returns. There is no free lunches. But i am ok to take this risk as even FD is not risk free like most people think. The huge hidden risk is the inflation risk in FDs and we have seen that in resent years.

So if there is risks everywhere, might as well take some returns for it.

Such is life , nothing is without risk.

But for risk taken in equity , i expect higher returns and there can be times where markets are just flat and i cannot get any monthly returns. This flatness can continue for years sometimes. Equity is just not suitable for consistent monthly/quarterly returns.

Equity is for long terms investments while debt is for short term monthly/Quarterly returns. Thats how it view the utility of these two asset classes.

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This is amazing, you have talent to spot the winner!

Blind SWP will harm capital (Sequence of return risk). What I suggested that over period of 5 years, there would enough opportunities to book 10% profits from equity MF and still protect he capital. Only thing is that we do know if that opportunity will come now or after four years

yes… everyone is different, what suits me, may not suit the man next door. Everyone has different take on what risk one is willing to take. I may choose to diversify in noncorrelated /negatively corelated asset like gold/equity ,if time is on my side, not necessarily my colleague in office will think exactly same way.

What we all do, is try to learn from each other and see what is applicable in own context.

Coming back to original query, I think you have thought thru the scope and understand risk/return dynamics. Other fixed return asset class which I know is INVIT/REIT, however I do not understand them much.


Since we are not trying to maximize return, I would keep it extremely simple.

10% in Liquid or FD (use this for Monthly withdrawal): Around 5-6% return

50% in Corporate Bond Funds: Around 7-8% return

20% in Gold - Sovereign Gold Bonds: Around 10% return

20% in Equity in Large Cap Stable and Quality stocks like HUL, Nestle, Dabur, Marico, TCS, Asian Paints, Pidilite etc. (Around 10): Around 15% return

Contribution of return from each asset allocation:

Liquid fund/FD: 0.5%
Corporate Fund: 4%
Gold: 2%
Equity: 3%

Total around 9.5%

Keep rebalancing every year.

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If it was my money and want to achieve 9% without equity. I would invest the entire amount in AAA bonds (7 - 8%), pledge, and sell far OTM options.

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That’s a risky proposition to sell naked options… I would say a safer way is to invest everything in AAA bonds and keep reinvesting the interest amount in index funds…