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10 Top Passive Income Sources In India For Working Professionals - Part 1

This blog will tell you all about investment options that can generate passive income for you. This will include options like mutual funds, stocks, and peer-to-peer lending. We will of course also cover how Cube Wealth helps busy professionals create a portfolio that can generate wealth for them.
February 24, 2021

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The greater the passive income you can build, the freer you will become. - Todd M. Fleming

Financial freedom doesn’t have a secret formula to it. The only standard recipe is investing in the right high-quality assets that can help you generate passive income. 

But it’s a common misconception that only the rich have access to the best passive income sources. Truth is, most investors can build a portfolio that generates passive income (a reliable app like Cube Wealth can help!) 

Let’s start by understanding what it means to generate passive income.

What Is A Passive Income Source For Working Professionals?

This example will help you understand both passive income and the sources that can generate it for you:

Assume you earn ₹1,00,000 a month. You take out 30% of this income which is ₹30,000 and invest it in an asset like mutual funds. After 6 months, you notice that the ₹30,000 gains value and is now ₹32,000. 

This didn’t happen through magic. It was due to the power of compounding which is a popular way of generating passive income. Here, the passive income is ₹2000 and the passive income source is mutual funds. 

Now, you can easily infer from the example that you did not have to work for the profits (₹2000). After all, you work hard for your money and it is only right that it works for you in return. 

Your money should generate recurring income either through capital gains or interest payment. That’s what passive income means in a nutshell. 

Top 10 Best Sources Of Passive Income For Working Professionals

1. Debt Mutual Funds

A debt fund invests in debt and money market instruments like bonds, t-bills, reverse repo, etc. It generates capital gains through the interest it receives on its investments. 

Usually, the interest rate is not very high but is enough to generate conservative gains in the range of 4-9%. Thus, debt funds may be a useful passive income source for conservative investors.

Moreover, debt funds have the potential to outperform traditional investment options like bank fixed deposits or a savings account that usually generate capital gains of 3-5% (on a good day). 

Top 3 Benefits Of Debt Funds As A Passive Income Source

  • Relatively safer than other mutual funds
  • Predictable returns
  • Low minimum investment amount (₹5,000 on Cube Wealth)

Here’s what happens when you invest ₹20,000 a month in debt funds that generate 8% returns on average:

Duration

Money Invested

Returns Earned

Total

3 years

₹7,20,000

₹96,116

₹8,16,116

5 years

₹12,00,000

₹2,79,334

₹14,79,334

10 years

₹24,00,000

₹12,83,314

₹36,83,314

20 years

₹48,00,000

₹70,58,944

₹1,18,58,944


Debt Funds Available On The Cube Wealth App

1. IDFC Banking & PSU Debt Fund

2. ICICI Prudential Corporate Bond Fund

Cube gives you access to 10+ top performing debt funds curated by Wealth First. Download the Cube Wealth app for the complete list of debt funds.

2. Large-cap Mutual Funds

Large-cap mutual funds are equity funds that invest in large-cap stocks. By definition, large-cap stocks include the top 100 companies in India in terms of market capitalization.

These stocks are known to be relatively stable and have a stellar track record since they’re the shares of industry-leading companies like Reliance, TCS, Infosys, etc. 

Large-cap funds look to capitalise on this stability and track record to generate capital gains that have historically been in the range of 9-16% over the long term. 

Top 3 Benefits Of Large-cap Funds As A Passive Income Source

  • Broad diversification
  • Relatively safer than small-cap and mid-cap funds
  • Low minimum investment amount (₹5,000 on Cube Wealth)

Here’s what happens when you invest ₹20,000 a month in large-cap funds that generate 12% returns on average:

Duration

Money Invested

Returns Earned

Total

3 years

₹7,20,000

₹1,50,153

₹8,70,153

5 years

₹12,00,000

₹4,49,727

₹16,49,727

10 years

₹24,00,000

₹22,46,782

₹46,46,782

20 years

₹48,00,000

₹1,51,82,958

₹1,99,82,958


Large-cap Funds Available On The Cube Wealth App

1. Mirae Asset Large Cap Fund

2. DSP Nifty Next 50 Index Fund

Download the Cube Wealth app for more details about large-cap funds

3. Multi-cap Mutual Funds

Multi-cap funds are equity funds that invest in stocks across market caps. The underlying principle of these funds is to leverage the strengths of the large-cap, mid-cap and small-cap categories. 

This allows multi-cap funds to generate potentially higher returns than large-cap funds. The downside is the presence of small-cap and mid-cap stocks that increases the volatility factor of multi-cap funds. 

Overall, multi-cap funds have historically generated 11-19% returns over the long term.  

Top 3 Benefits Of Multi-cap Funds As A Passive Income Source

  • Diversification across market caps
  • Potentially safer than small-cap and mid-cap funds
  • Low minimum investment amount (₹6,000 on Cube Wealth)

Here’s what happens when you invest ₹20,000 a month in multi-cap funds that generate 14% returns on average:

Duration

Money Invested

Returns Earned

Total

3 years

₹7,20,000

₹1,78,821

₹8,98,821

5 years

₹12,00,000

₹5,44,015

₹17,44,015

10 years

₹24,00,000

₹28,41,828

₹52,41,828

20 years

₹48,00,000

₹2,15,26,926

₹2,63,26,926


Multi-cap Funds Currently Being Recommended  On The Cube Wealth App

1. SBI Magnum Multicap Fund

2. ICICI Prudential India Opportunities Fund

While we update our blogs regularly we suggest you Download the Cube Wealth app to see the best multi-cap funds being recommended today.

4. International Mutual Funds

International mutual funds invest in stocks of companies from countries like the US, Japan, China, Germany, etc. Investing in direct equity of foreign companies has its perks but requires thorough research.

Busy professionals may not have the time to track and keep up with the stock price and currency fluctuations. Moreover, other factors like exchange rate and brokerage charges come into the picture. 

International funds can be a potential passive income source for working professionals because a fund manager analyses and invests in the right international stocks of high flying companies like Amazon, Apple, Google, Tesla, etc.

International funds have been known to generate returns of 14-20%. Let’s look at the benefits of international funds. 

Top 3 Benefits Of International Funds As A Passive Income Source

  • Potentially high returns
  • Geographical diversification
  • Low minimum investment amount (₹10,000 on Cube Wealth)

Here’s what happens when you invest ₹20,000 a month in international funds that generate 18% returns on average:

Duration

Money Invested

Returns Earned

Total

3 years

₹7,20,000

₹2,39,702

₹9,59,702

5 years

₹12,00,000

₹7,53,157

₹19,53,157

10 years

₹24,00,000

₹43,25,150

₹67,25,150

20 years

₹48,00,000

₹4,20,69,744

₹4,68,69,744

International Funds Available On The Cube Wealth App

1. Edelweiss Greater China Equity Off-shore Fund

2. Franklin India Feeder - Franklin U.S. Opportunities Fund

Download the Cube Wealth app for more international fund recommendations

5. Blue-Chip Stocks

Blue-chip stocks are shares of industry-leading or iconic companies that have a history of delivering stable returns. These companies are leaders in their own right and have a track record to back it up.  

In India, the shares of the top 100 companies can be classified as blue-chip stocks and can be found in the NIFTY 100 index. Few examples of blue-chip stocks include:

  • Larsen & Toubro Ltd.
  • HDFC Bank Ltd.
  • Bharat Petroleum Corporation Ltd.
  • Tata Motors Ltd.

Top 3 Benefits Of Blue-chip Stocks As A Passive Income Source

  • Historically consistent returns
  • Reliable dividends
  • Long term capital growth

While blue-chip stocks are beneficial, there are 100 stocks to choose from and would require you to analyse the balance sheet, past performance, and other facets of every company.

But there is a convenient way to invest in blue-chip stocks - Cube Wealth gives you access to stock advice from Purnartha, Cube’s Indian equities partner, who have 7500+ clients and an AUM of 7,000+ crores.

Click here for Part 2 - 10 Top Passive Income Sources In India For Working Professionals - Part 2:

10 Top Passive Income Sources In India For Working Professionals - Part 2

Watch this video to know more about Indian stock advice by Purnartha on Cube Wealth

FAQs on Passive Income Sources

1. What are the best sources of passive income in India?

Passive income sources in India include assets that generate dividends like Indian stocks, US stocks, and mutual funds. Interest income generating assets like bonds, FDs, RDs, and others also count as passive income sources. But that's not all.

Alternative investments (assets that don't fall under the traditional branch of investing) like P2P lending, Consumer Loans via Merchants, Asset Leasing, etc. also generate recurring payouts that's passive income.

2. How can I generate passive monthly income in India?

You can generate a monthly passive income by investing in assets like P2P lending, consumer loans via merchants, and asset leasing on an app like Cube Wealth. These assets are non-market linked investments that help you earn recurring payouts.

Shriram Shekhar
Shriram is a Content Marketer at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. Shriram’s love for philosophy, product development, and empowering people through quality content is what got him to Cube Wealth.

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