How to receive monthly income from mutual funds

Glad to hear that you want to invest in mutual funds in lieu of fixed deposits in order to get monthly income. Please note there are two ways to get regular income from mutual funds – 1) Invest in mutual funds which has a track record of declaring monthly dividends 2) Invest in lump sum and start drawing a fixed amount every month through SWP.

However, before investing in mutual funds you must know your risk profile and the investment horizon. This helps you choose the right category of funds. For example – if your risk profile is moderate then you can invest in hybrid debt funds (also known as MIPs) or balanced funds, if your risk taking ability is moderately high.

Monthly dividend from mutual funds – To know about dividend paying mutual fund schemes in these two categories, please click here - https://www.advisorkhoj.com/mutual-funds...

SWP from balanced mutual funds – Though you can draw a fixed amount by investing in any scheme from any category of mutual funds, the balanced funds are more popular and less volatile compared to pure equity funds as balanced funds invest both in equities and debt. Balanced funds invest at least 65% in equities.

1. SWP helps you draw a fixed amount on a fixed date every month but suitable only if you can take moderately high risk and have an investment horizon of minimum 5 years. If you remain invested for a long period, it has been found that you can get some capital appreciation too on your initial investment even after withdrawing through SWP.

2. However, you should not draw more than 8-9% annually during the initial years from your lump sum investment. For example – If you want to draw Rs 10,000 per month from balanced funds, you should ideally invest Rs 15 Lakhs assuming you will not draw more than 8% (15,00,000 x 8% /12)

3. The profits made on all the SWP withdrawals from balanced fund upto 12 months from the date of investment will attract short term capital gains tax which is currently at 15% for equity and balanced funds. However, the gains made on all the SWP withdrawals after 12 months will be tax free under long term capital gains.

While you can go through all of the above and try understand what would be ideal for you, we suggest that you should take help of a mutual fund advisor in your city if you are new to mutual funds. If the mutual fund advisor is good, he will help you in preparing your KYC ( as you will be investing for the first time in mutual funds), suggest good funds, help you in your investments and shall also take care to service your investments in future.

With regards to top performing balanced funds, you may consider investing in 1 or 2 funds from this list - ICICI Prudential Balanced Fund, Principal Balanced Fund, DSP BlackRock Balanced Fund and HDFC Balanced Fund.

Hope the above helps! Thanks for writing to Advisorkhoj !!