I have 18 lacs rupees and my age is 63. I want safe investment with yearly 15% per annum. So how to manage this amount

Ans: It’s great that you are looking to manage your funds wisely. Let’s explore the best strategies to achieve your goal.

Understanding Your Situation
You have Rs 18 lakhs and you are 63 years old. You want a safe investment with a yearly return of 15%. While aiming for high returns is commendable, it's important to understand that higher returns typically come with higher risks. At your age, safety and capital preservation are crucial.

Evaluating Investment Options
We’ll explore different investment options that can provide a balance between safety and potential returns. Since you are looking for safe investments, we need to manage expectations realistically.

Mutual Funds
Mutual funds are a good option for diversified investment. There are various categories:

Equity Funds: High returns but high risk. Not the safest option at your age.
Debt Funds: Safer than equity funds, invest in bonds and government securities.
Balanced Funds: Mix of equity and debt. Moderate risk and returns.
Systematic Withdrawal Plan (SWP)
With mutual funds, you can use a Systematic Withdrawal Plan (SWP) to get regular income. SWP allows you to withdraw a fixed amount periodically, providing a steady income stream.

Fixed Deposits (FDs)
FDs are one of the safest investment options. The returns are guaranteed but lower than 15%. However, they provide capital protection.

Power of Compounding in Mutual Funds
Investing in mutual funds leverages the power of compounding. Compounding means earning returns on your returns, leading to exponential growth over time.

Long-Term Growth
Equity mutual funds can provide significant growth in the long term, despite market volatility. This can be part of a diversified portfolio.

Risk Assessment and Management
Understanding and managing risk is crucial, especially at your age. Diversification and regular monitoring help mitigate risks.

Diversification
Spread your investments across different asset classes to balance risk and return. Diversification reduces the impact of poor performance in one asset class.

Regular Monitoring
Review your portfolio regularly to ensure it aligns with your goals and market conditions. Adjustments may be necessary to stay on track.

Advantages of Actively Managed Funds
Actively managed funds have professional fund managers who make investment decisions to outperform the market.

Professional Management
Expert fund managers analyze market trends and make informed investment choices, aiming for higher returns.

Flexibility and Adaptability
Actively managed funds can quickly adapt to market changes, which can help in mitigating risks and capturing opportunities.

Disadvantages of Index Funds
Index funds track a market index and are passively managed. They have lower fees but may not provide the best returns.

Market Dependence
Index funds' performance is tied to the market index. They don’t aim to outperform the market, limiting potential returns.

Lack of Flexibility
Index funds cannot adapt to market changes quickly. They are less flexible compared to actively managed funds.

Importance of a Certified Financial Planner
A Certified Financial Planner (CFP) can help you create a tailored investment strategy considering your age, risk tolerance, and financial goals.

Personalized Advice
CFPs provide advice tailored to your specific needs and circumstances. They help you make informed investment decisions.

Long-Term Planning
A CFP assists in creating a long-term financial plan, ensuring you have sufficient funds throughout your retirement.

Evaluating LIC and ULIP Policies
If you hold LIC or ULIP policies, assess their returns. These policies often provide lower returns compared to mutual funds.

Surrender and Reinvest
Consider surrendering low-yield LIC or ULIP policies and reinvesting the proceeds in mutual funds. This can enhance your overall returns.

Tax Efficiency
Investing in tax-efficient instruments can maximize your returns. Mutual funds, especially Equity Linked Savings Schemes (ELSS), offer tax benefits.

ELSS for Tax Savings
ELSS funds provide tax benefits under Section 80C and also offer equity exposure for growth. They have a lock-in period of three years.

Emergency Fund
Maintain an emergency fund to cover unforeseen expenses. This can be in a liquid fund or a savings account for easy access.

Safety Net
An emergency fund ensures you don’t have to liquidate long-term investments in case of unexpected expenses.

Setting Realistic Expectations
Aiming for a 15% return per annum is ambitious, especially with a focus on safety. It's important to set realistic expectations.

Balancing Safety and Returns
Focus on a balanced approach that ensures capital preservation while aiming for moderate growth. This reduces risk while providing reasonable returns.

Final Insights
Investing at 63 requires a careful balance between safety and growth. Mutual funds, especially balanced and debt funds, offer a good mix of stability and returns. Diversification and regular portfolio reviews are crucial.

Remember, the key is to maintain a diversified portfolio that aligns with your risk tolerance and financial goals. Consult with a Certified Financial Planner for personalized advice and to ensure your investments are well-managed.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in