For many Indian investors, mutual fund SIPs remain the default route for long-term wealth creation. However, as financial goals evolve, a growing number of investors are also looking for investments that can generate regular income alongside long-term capital appreciation.
Financial planners say investors today are increasingly exploring alternative income-generating instruments that go beyond traditional fixed deposits and mutual funds. These options range from market-linked products such as REITs and dividend-paying stocks to government-backed schemes offering predictable payouts.
Here are seven investment options experts say investors should understand if they want to build regular cash flow from their portfolios.
1. Securities Lending and Borrowing Mechanism (SLBM)
SLBM allows investors to temporarily lend shares they already own to traders, mainly for short-selling purposes, while retaining ownership of those shares.
Investors earn lending income during the lending period and may continue receiving benefits like dividends. The mechanism is available through most major brokers after activating the SLBM segment in trading accounts.
Experts say this option may suit long-term investors holding stocks they do not intend to sell immediately.
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2. REITs
Real Estate Investment Trusts (REITs) have emerged as a popular alternative for investors seeking rental-style income without directly purchasing property.
REITs invest in commercial real estate assets such as office parks, malls, and IT buildings. Under SEBI regulations, at least 90% of cash flows generated must be distributed to investors.
Unlike physical real estate, REITs are listed on stock exchanges and can be bought and sold like shares. Investors usually receive quarterly payouts.
Popular listed REITs in India include Embassy REIT, Mindspace REIT, Brookfield India REIT, and Nexus Select Trust.
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3. InvITs
Infrastructure Investment Trusts (InvITs) function similarly to REITs but invest in infrastructure projects such as highways, transmission lines, renewable energy assets, and pipelines.
These operational projects generate steady cash flows through toll collections or usage fees, a portion of which gets distributed to investors.
Market experts note that InvITs have gained traction among income-focused investors looking for relatively stable yields from infrastructure assets.
4. Dividend stocks
Dividend-paying stocks continue to attract investors seeking periodic income. Companies distribute part of their profits to shareholders as dividends, allowing investors to generate cash flow without selling shares. However, analysts caution against selecting stocks solely based on high dividend yield.
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Instead, investors should evaluate company fundamentals, cash flows, payout sustainability, and dividend history before investing.
5. SWP
A Systematic Withdrawal Plan (SWP) allows investors to invest a lump sum into mutual funds and withdraw a fixed amount monthly or quarterly.
Financial planners often recommend SWPs during retirement because they allow the remaining corpus to stay invested and continue compounding while generating regular income.
Taxation in SWPs is also considered relatively efficient since only the gains portion of withdrawals is taxed.
6. POMIS
The Post Office Monthly Income Scheme (POMIS) remains a popular choice among conservative investors seeking predictable monthly income.
The scheme offers fixed monthly payouts for five years and is backed by the government, making it attractive for risk-averse investors.
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7. SCSS for senior citizens
The Senior Citizen Savings Scheme (SCSS) is specifically designed for retired individuals seeking stable income.
The government-backed scheme offers quarterly payouts and tax benefits under Section 80C, though interest income remains taxable. Experts say the growing popularity of such products reflects a broader shift in investor behaviour, where portfolios are increasingly being structured not just for wealth creation but also for steady income generation and financial flexibility.
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