I am looking to generate Rs 1 lakh as dividend income annually. Could you recommend some of the stocks that can help create this income?Adhil Shetty CEO, BankBazaar:Dividends typically offer a return of 2-3% annually. The dividend income is also taxable. This means that for an income of Rs 1 lakh, you would roughly need to invest between Rs 33 lakh and Rs 50 lakh. Given this rate of return, you may be better off investing in a fixed deposit, which will offer 6-7% returns. The same investment in a fixed deposit would give you the same returns, along with an equivalent capital growth, though the returns would still be taxable. A better option is to invest in an index fund or a blue-chip mutual fund and liquidate Rs 1 lakh annually. This would be tax-free as your gains would not fall in the taxable category, and your remaining corpus will continue to grow at roughly 12% CAGR.
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I have a lump sum of Rs 50 lakh to invest and would like to generate monthly income through mutual funds (MFs), including exchange-traded funds (ETFs). Could you suggest the best mutual funds for generating the highest monthly returns
Vidya Bala Co-Founder, PrimeInvestor.in:
The first option to generate regular income should be the RBI Floating Rate bonds, where the interest will be quarterly. This will lend safety and generate assured income. You can invest in mutual funds in addition to this option. Within mutual funds, the ideal way to generate an income stream is to opt for systematic withdrawal plans (SWP) in short duration debt funds. ETFs do not have too many options in the short duration debt, other than liquid funds. Hence, you can consider funds such as the Aditya Birla Sun Life Floating Rate, Kotak Bond Short Term and HDFC Short Term Debt to generate income via SWP. Keep in mind that mutual funds do not deliver fixed returns. You can only ensure fixing the amount that you withdraw. Make sure you do not withdraw over 5-6% of your corpus per year so that your withdrawal is less than the likely returns on the debt funds. I have a lump sum of Rs 50 lakh to invest and would like to generate monthly income through mutual funds (MFs), including exchange-traded funds (ETFs). Could you suggest the best mutual funds for generating the highest monthly returns?
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