How Can You Earn Regular Income from Mutual Funds? 5 Popular Ways

by Raghav M. Marketing

From working professionals, retired citizens, to even homemakers in India are now searching for additional income sources. While there are plenty of ways to earn consistent income from your investment, an increasing number of people are achieving this through mutual funds.

While most individuals know the long-term capital growth potential of mutual funds, they can also be used to earn regular income.

Here are five ways in which mutual funds can help you have an alternative source of income

1. Income Funds

If you are looking for additional source of regular income, income funds can be a great option. These are debt funds with shorter maturity and minimum risk. These funds invest your money in securities which offer interest payments or dividends. They generally hold bonds, stocks, and other debt and money market instruments.

The interest or dividend received from the investment is distributed among the investors as regular income.

2. SWP in Equity Funds

Most of the mutual funds now offer SWP (Systematic Withdrawal Plan) facility. With the help of this facility, you can fix an amount that will be automatically withdrawn from your investment at a duration selected by you.

As equity funds are known for their capital growth, you can select a top equity fund and opt for this SWP facility to earn regular income.

3. Dividend Option with Equity Schemes

When you invest in a mutual fund, you are provided with two different options- growth and dividend. With the dividend option, the dividends received by the scheme are distributed to the investors. But once the dividends are distributed, the NAV of the scheme falls slightly to make the dividend adjustment.

With the growth option, the dividends are reinvested to deliver higher returns to the investor. If you are looking for regular income, you can invest in an equity scheme and select the dividend option. But note that the dividend distribution is not fixed. You will only receive the dividends if the scheme is making profits.

4. Dividend Option with Conservative Hybrid Schemes

If you are a risk-averse investor, you can invest in a conservative hybrid scheme and go with the dividend option. These schemes invest most of your money in the debt market and the remaining in the equity market.

As compared to pure debt funds, these funds can help deliver higher returns due to their equity exposure. But at the same time, they are considerably safer than pure equity funds.

5. Regular Withdrawal

Another not so convenient but still a viable option to earn regular income from mutual funds is to redeem fund units from your investment regularly. You can consider schemes like equity, debt, ETFs, or corporate bond funds for your investment and then redeem a few units at regular intervals to get a steady income. 

Prefer funds with zero or minimum exit load as this will help you withdraw a slightly higher amount when you’ll regularly redeem the units and withdraw your money.

Earn Regular Income From Your Investments

There are several ways in which you can get a consistent income from your mutual fund investments. If you are looking for an alternative source of income, you consider the options listed above. Before investing, make sure that you thoroughly understand the schemes, how they work, and how you can select schemes with high returns potential to make the right decision.

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Created on Jan 16th 2019 03:29. Viewed 436 times.

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