How To Earn INR 50,000 Every Month In Returns?

There is no easy hack for getting rich quick. But are there any hacks to grow your wealth by a certain margin? The answer is yes! Before we get you started on the how, the what, and the why, it is important to note that this blog is about generating passive income via different investment methods, which essentially requires you to build a sizable portfolio over a stipulated period of time.

Most Indian investors have a growth investing mindset where they aspire to increase the overall value of their investments by buying stocks at one price and selling at a higher price in the future. However, this does not warrant a sustainable financial future as such investments are subject to market risks. This is where Income Investing comes into play. The sole concept of income investing is to generate a steady stream of passive income from the investment portfolio. Before we get into the specifics of how you can easily generate as much INR 50,000 in returns every month, let us first understand these two investment approaches.

Growth Investment

Growth investments typically include - Stocks, Mutual Funds and ETFs. The growth-oriented investors tend to buy stocks of companies or sectors that are expected to grow in the future. These kinds of investments however can also lose value in situations where the markets don’t perform well or when the stocks are highly volatile. This investment strategy is ideal for investors who have a high risk tolerance and seek more immediate returns. This approach is not ideal for individuals seeking more steady returns over long periods.

Income Investment

Income investments are ideal in scenarios where investors seek financial stability and alternative income sources. This approach consists of investments across different asset classes that are generally considered low-risk. The income investment strategy is also more value-oriented if carried out over a longer time horizon. However, income investments generate consistent but low returns.

Is Income Investment A Combative Approach?

The income investment strategy offers various benefits that growth investing doesn’t. Some of these benefits include:

• Passive Income
• Consistent Returns
• Predictable Returns
• Financial Stability

Despite all these benefits, this approach does not warrant one thing. Consistent yet high returns!

So, what’s the catch?

Combine Growth & Income Investing For High Returns

With enough time on your hands, you can embark on the journey of a better financial future. Where your reliance on ‘income from a job’ is reduced and shifted eventually towards ‘passive income’.

This tale is as old as the first stock market crash followed by anecdotal lessons from several other economic downturns, investors have come to realise that merely buying and holding or paying huge premiums for growth can be risky. And the most important thing is one should never underestimate the value of a well-diversified portfolio. Combining your growth and income investment strategies can pave the way for well-diversified portfolio creation.

As seen in this infographic, your first and foremost step should be to build a growth portfolio. The ideal investment in this scenario is to get SIP in equity-based mutual funds. 

Let the equity keep accumulating returns for at least 3-4 years. Book profits once you can see a sizable capital appreciation.

Your ultimate goal should be to infuse the profits earned from equity investments into an income-generating asset class. It is at this point that you will start generating monthly returns from your asset-backed investment.

But why even bother to go through this long loop? Why not just get risky and invest in stocks or why not directly invest in an asset-backed investment?

Let’s assume you cut to the chase and invest a large amount from your savings in stocks; what happens if you lose all the money you invested in a volatile market?

Or let’s take into consideration the second scenario where you invested in a fixed-income asset and did not generate enough returns to fulfil your financial goals.

You may have to experience a longer time horizon but your overall yield on investment will improve as this approach will give you average returns of both growth and income portfolio.

Reliable Fixed Income Generating Investments

In order to ensure that you derive the most value from your investments, it is crucial that you pick the right options. Here are some for you to consider:

• Bonds: Bonds that offer non-cumulative interest can generate regular income. Non-cumulative means interest is not allowed to accumulate. Instead, it is paid to the investor on regular intervals. This interval can be monthly, quarterly, annually. Such bonds are generally high quality bonds issued by reputable financial institutions and rated by credit rating agencies
• Leasing: Leasing is perhaps the most innovative and legitimate way to generate steady income. In such an investment, you get to lease an asset to high-growth companies in exchange for periodic payments along with the interest. Such investments can earn you up to 22% pre-tax IRR. The nature of this investment is considered low-risk due to the investment being backed by a purchase of an asset.
• Fixed Deposits (FD): Fixed deposits are one of the oldest known fixed-income instruments. An FD ensures interest earnings of at least 7.0% p.a. In such investments, banks pay the interest in the form of monthly income. The interest income gets deposited to your linked savings account each month on a fixed date.

Outcome Of Growth + Income Portfolio

It would be an understatement to say that diversification is the only outcome of combining two investment strategies. Diversification is merely a characteristic of what a combined portfolio looks like. Here are the two improvements that you will eventually observe in your finances.

Reduction Of Dependency On Salary

The burgeoning expenses associated with lifestyle, health, and general cost of living create a huge dependency on salaries. Ultimately pushing individuals to barely sustain themselves on a single income source.

By building an agile portfolio (as shown in the infographic), you can start reducing your dependency on salary within just 3-4 years.

Desirable Passive Income Generation

The need for passive income generation can emerge for many reasons. Some investors plan towards their retirement goals, while others plan to fulfil their personal goals. Either way, setting a clear objective is extremely important while planning your investments. The second step is to build a portfolio that is sizable, diversified, and yields better returns than the ongoing inflation rate.

There is a great emphasis placed on the size of your portfolio time and again as it determines the level of passive income.

Let's suppose, your primary income is INR 1,00,000 and the average yield on your investments is @8% p.a. Your portfolio must be worth at least INR 75 lakhs to give you monthly returns of up to INR 50,000. This additional income is almost equivalent to 50% of your monthly income and can also help you reduce your dependency on your primary income.