I want to earn Rs 1 lakh monthly by investing Rs 75 lakh in lump sum. Is it possible?

I have Rs 75 lakh in investments. How can I earn Rs 1 lakh per month by investing such an amount? Also, let me know how long I can get this income.

Jamuna

Reply by Mayank Bhatnagar, Co-founder & COO, FinEdge

One option to meet your requirement could be to invest Rs 35 lakhs into an Arbitrage fund (low risk) and give instructions on withdrawing Rs 1 lakh through a Systematic Withdrawal Plan (SWP) from this fund. An SWP is a staggered withdrawal mechanism from a fund and is popularly used to generate income in a tax-efficient manner. The amount in the arbitrage fund will exhaust itself after generating income for approximately 45 months.

The balance amount of Rs 40 lakh can be invested by way of STP (Systematic Transfer Plan) for 12 months in a diversified equity fund. This amount should ideally be invested for the same time period that the SWP is running from the Arbitrage fund.

- When you have 6 months of corpus left to withdraw, through a process of de-risking, the amount that is lying in the equity fund should be switched into an Arbitrage fund and a fresh SWP instruction for Rs 1 lakh can be given.

After generating income of Rs 1 lakh per month, the total investment corpus will exhaust itself in the 9th year approximately.
 
To further customise your specific goals, it would be advisable to get an investment expert who can create a portfolio that generates optimal risk adjusted returns. The purpose of such a portfolio should be to generate income and preserve capital for as long as possible.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)