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Can I earn monthly income with mutual funds?

If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

ET Online|
Mar 13, 2019, 04.16 PM IST
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I want to invest Rs 20 lakh in mutual funds for a monthly income. I am expecting income of Rs 18,000 per month. Is it possible to get such income with 20 lakh rupees? Can you suggest some strategy to achieve it?
--Mehul Randhawa


Raghvendra Nath, managing director, Ladderup Wealth Management responds:

While there are mutual funds which have consistently paid out monthly dividends, it is not assured that such funds would continue to declare a high dividend amount. If there is a phase where markets have corrected sharply, it may be very difficult to pay high dividend of more than 10 per cent annually from the fund. Hybrid funds like HDFC Balanced Advantage and ICICI Prudential Equity & Debt Fund - monthly dividend plan are highly recommended for your strategy.

Apart from this, you can consider creating a Systematic Withdrawal Plan(SWP) of Rs 18,000 by investing Rs 20 lakh in growth plans of the mentioned hybrid funds. With SWP, Rs 18,000 worth of units would be sold every month irrespective of market performance. However, it would also mean that more units would be redeemed when markets have corrected and lesser units would be redeemed when market out performs, thus averaging out the sale price and the balance units would keep growing as per the market and fund performance.

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(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)
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