Market Insights5 Mins Read
Looking for Regular Income Investment Options? Try Our Dividend Opportunities Kristal!
The Indian investor has traditionally preferred regular income investments over their high-risk equity counterparts. We were known as a country of savers where frugality was treated as a virtue. Hence, traditional regular income instruments like bank fixed deposits were a household name.
The reason I am talking about this in the past tense is that the millennial generation has reversed the trend. We are now a country with a large millennial population that prefers spending rather than saving. Most millennials don’t start investing in the early years of their lives and start only once they are married or reach their 30s.
This has led to a shift in the demand for investment products too.
An Overview of the Indian Regular Income Investment Market
In recent years, India has evolved into a preferred destination for investing due to innovation and development; especially in the startup hemisphere. Traditionally, most Indians invested a bigger portion of their savings in regular income instruments while exposing a relatively smaller portion to equity or other higher-risk investments.
These included debt instruments like bank fixed deposits, post office deposits, etc. However, this led to a considerable change in the investment landscape due to certain limitations of the traditional regular income instruments as explained below:
Almost all regular income instruments have a fixed lock-in period. This restricts investors from redeeming their investments within a stipulated period of time. Some schemes allow investors to redeem the units at a premature redemption charge of around 1-2%.
No scope for capital appreciation
While the traditional instruments offered regular income, they were designed in a manner that there was no scope for capital appreciation. Hence, investors needed to look at other avenues for growth while staying invested in these instruments for income.
While debt instruments were the preferred option for regular income, modern investors are willing to take calculated risks to ensure the same while overcoming the limitations offered by the traditional instruments. In fact, many investors have started considering dividend stocks for regular income.
Investing in Equity for Regular Income? You can’t be serious!
You read that right. Investing in equity can help you generate regular income without the limitations of debt instruments. Think about it – when you invest in stocks that pay high dividends, you can receive regular income even when the markets are down while your capital appreciates silently. To me, it sounds like a win-win – earn regular income AND see your capital grow.
I tried this method as a young investor and achieved some success too. I would choose stocks with a history of paying high dividends, study the companies to find factors that might increase the liquidity of these companies in the near future, and invest in them.
Millennials like simple investments. This explains the increase in demand of Index Funds and Exchange Traded Funds. The low expense ratios and simple design of tracking an individual index appeal to this generation. They also expect to retire early and live longer than the previous generations. While they might start investing late, they are more responsible and aware of the options available to them.
A Lowdown on the India High Dividends Kristal
When Team Kristal identified the limitations faced by investors while selecting instruments for regular income, they got to work to create a portfolio of stocks of high dividend-paying companies. They used the proprietary algorithm to create this portfolio which included stable companies that had a history of paying good dividends. The algorithm also minimizes the tracking error and creates a portfolio that closely tracks the Nifty Dividend Opportunities 50 Total Return Index.
The India High Dividends Kristal overcomes the limitations of the traditional debt instruments offering regular income as explained below:
No Lock-in Period
Since the portfolio comprises stocks of various companies, you can sell your stake at any time without worrying about the lock-in period or a penalty for premature redemption.
Scope for Capital Appreciation
When you invest in India High Dividends Kristal, your funds are invested in stocks that have the history of offering high dividends. Hence, you have an opportunity to earn regular income while your capital appreciates due to an increase in the share price. Most regular income instruments do not offer this benefit.
It is important to note here that since the portfolio invests in equity, it is susceptible to market risks. Also, companies pay dividends on profits – not capital. Therefore, while investing in stocks for regular income, it is important to find companies that are likely to do well in the near future. This can be a time-consuming research process. By opting for the India High Dividends Kristal, you can leave all the research and hard work to Team Kristal while you enjoy the benefits.
Options for Regular Income Generating Instruments
Here are some other options for regular income that I have considered in the past:
Many companies offer fixed deposits to investors at high rates of interest. These deposits are rated by credit rating agencies like ICRA and CRISIL allowing investors to choose the high-performing ones. They are usually offered by non-banking finance companies (NBFCs) for varying maturities.
Post Office Monthly Income Scheme
The Indian postal service offers a monthly income scheme offering returns of around 7.7 percent per annum. The maturity period for the scheme is five years. It ensures capital protection while offering monthly returns. While the tenure of the scheme is five years, investors can withdraw after the completion of one year by deducting a penal charge.
Long-term government bonds offer good returns with considerably lower risk. These are good options if you have an investment horizon of 10+ years.
Monthly Income Plans by Mutual Funds
Most mutual funds offer a monthly income plan by investing around 25 percent of the portfolio of the scheme in equity and the rest in debt and money market instruments. Investors can select the dividend payout option for receiving regular income.
Investing with an objective of regular income can be tricky. While I jumped from one option to the other during my younger years, I didn’t have organizations like Kristal.AI working hard to make things simpler for investors like me. Now, with all the years of wisdom, I can tell the difference between a ‘good’ and ‘not-so-good’ investment option. But for new investors, Kristal’s India High Dividends basket is the answer to their regular income investment question.
Remember, a good investment portfolio requires clear financial goals and investment objectives, well-defined risk tolerance, and investment horizon. With all the aspects in place, looking for a good instrument becomes easier. Ensure that you always stick your investment plan and achieve your financial dreams.
This blog article has not been reviewed by the MAS. It is prepared solely for information purposes and does not constitute an offer or solicitation for the purchase or sale of units in the funds. This does not constitute any form of investment advice and Kristal Advisors (SG) Pte Ltd does not take into account your personal investment objectives, specific investment goals, specific needs, or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Kristal Advisors (SG) Pte Ltd.
Post tagged under
Other stories you might like