Passive Income Goal: ₹10k Monthly by 2026

Passive Income Path: Start ₹10,000 Monthly in 2026

Genuine passive income demands discipline, not just side hustles or quick trading profits, according to Rohin Pagdiwala, Founder of Pagdiwala Investments. For individuals beginning with ₹10,000 per month in 2026, understanding this distinction is crucial for long-term financial success. Pagdiwala defines passive income as money generated for consumption without active work.

Build First, Withdraw Later

Pagdiwala stresses that extracting income too early from a small initial investment is a significant mistake. The priority must be building a substantial corpus where capital works for you. Early in the investment journey, focus should be on long-term accumulation through a diversified portfolio. This typically involves a blend of equity mutual funds, hybrid funds, and select fixed-income products.

Compounding is the primary engine of growth during this foundational phase. Prematurely drawing income can halt portfolio maturation and hinder wealth accumulation.

Product Selection Is Key

While consistent saving and discipline are fundamental, the choice of investment products dictates ultimate outcomes. Pagdiwala states, "Behaviour matters, but products matter more." The right instruments will determine the amount and sustainability of passive income.

For most retail investors, mutual funds serve as the core of passive income strategies due to their inherent diversification, regulatory oversight, and flexibility. Once a sufficient corpus is amassed, Systematic Withdrawal Plans (SWPs) offer a method to generate regular income while remaining invested.

Dividend-paying stocks, bonds, fixed deposits, and newer instruments like Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) can supplement returns. Pagdiwala cautions that riskier avenues such as peer-to-peer lending, while potentially offering higher yields, require diligent monitoring.

The 3-4% Rule Of Thumb

When passive income generation commences, expectations must align with realistic figures. Pagdiwala references the widely accepted 3-4% withdrawal rule. This suggests that an investor with a corpus of ₹1 crore could reasonably withdraw approximately ₹3 lakh to ₹4 lakh annually, equating to roughly ₹40,000 per month.

This rule's underlying principle is capital preservation. The aim is for the remaining invested corpus to grow at a rate exceeding inflation, ensuring long-term sustainability.

Age Shapes Strategy

Passive income strategies naturally evolve with an individual's age and life stage. Younger investors typically exhibit a higher risk tolerance, driven by the desire for earlier financial freedom. Conversely, older investors often possess larger corpuses and adopt more conservative income generation approaches.

Asset allocation, withdrawal rates, and risk tolerance must adapt to these life changes. What is suitable in one's twenties may not be appropriate in one's fifties.

A Word Of Caution On Early Retirement

Pagdiwala expresses skepticism towards the notion of retiring early without a clear purpose, warning it can lead to mental and physical deterioration. He also highlights the significant danger of "sequence-of-returns risk," where market downturns coincide with the start of withdrawal periods. Investors should ideally allow their corpus at least four to five years to grow before considering leaving their primary employment.