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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 22, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Visu on Jul 22, 2025Hindi

At my 60, being conservative in spending with no bad habits and no ill or pill. Ofcourse with no commitment supported with enough medical insurance coverage. I have dividend and other income for my expenses. The surplus of dividend income is available for investment at annual lump sum since monthly expenses varies. Now where to invest this. Should we not invest at golden years in equity, or only to choose debt But general suggestion is to reduce equity investment at older age or shift from equity to debt. My question is it is available surplus so should we not invest in equity mutual fund in lump sum annually (this is not fixed amount annually but varies with actual expenses) because it is throw or grow. Please guide the ideal investment option. Thank you

Ans: At age 60, with no loans, no financial dependents, a healthy lifestyle, and surplus income after meeting all expenses — you are truly in a financially golden position. Your clarity, discipline, and secure foundation are to be appreciated.

Let’s now answer your core question with full clarity and from a 360-degree perspective: should surplus income at this stage go to equity or only debt?

Let’s go point by point.

? Your Financial Context is Strong

– You have no ongoing commitments.
– You have sufficient medical insurance.
– You have dividend and other income streams.
– Your expenses are conservative.
– Surplus is available each year.

This gives you full freedom to make investment decisions without pressure.

You are not investing to meet daily needs — you are investing to grow wealth or leave a legacy. That is a big difference.

? Traditional View on Equity After 60 – Needs a Re-look

You are right — most general advice says: reduce equity after age 60. Shift to debt. That advice applies when:

– The investor depends on returns for daily living
– Has no income stream after retirement
– Cannot bear losses if markets fall
– Has no buffer or flexibility

But your case is very different.

You are:

– Not dependent on equity returns for monthly expenses
– Not under pressure to withdraw investments regularly
– Not driven by emotion or fear in spending
– Already secure with medical coverage and no liabilities

So, you don’t need to avoid equity. You just need to use equity wisely.

? Equity is Still Relevant – Even After Age 60

Many think equity is only for the young. That is not fully correct.

If you are not withdrawing from the corpus in the short term, equity is fine. In fact, it is essential to beat inflation.

Debt alone will not grow your wealth meaningfully. Inflation will reduce your purchasing power over 10-15 years.

At 60, your life expectancy could be 85 or beyond. That’s 25 years more.

Investing entirely in debt for 25 years is risky in itself. Returns won’t beat inflation. Over time, money will lose value.

So yes, equity has risk — but ignoring equity is a greater risk.

? Your Investment Type – Surplus in Lump Sum

You are not investing monthly. You want to invest surplus once a year, depending on what is left after expenses.

That is practical and flexible. Since the amount is variable, the strategy must be flexible too.

The key question is: where to invest that annual surplus?

Let us now explore your options.

? Pure Debt Option – Not Ideal for You

You may think of parking all surplus in:

– Bank FDs
– Senior Citizen Savings Scheme (SCSS)
– Post Office MIS
– RBI Bonds
– Corporate FDs

But the challenge is:

– Returns are low — 6.5% to 8%
– All are taxable as per slab
– Real return (after tax and inflation) is low
– No potential for wealth compounding

If you don’t need this money for 5+ years, then full debt is not efficient.

Debt is useful for stability and liquidity, not growth.

? Pure Equity Option – Needs Caution, But Not Avoidance

Should you put entire surplus in equity mutual funds?

Yes — but not all in one shot, and not without a cushion.

Since you are retired, you need to preserve capital too.

You may invest part of surplus into equity mutual funds. But it must be:

– Diversified
– Through regular plans with a trusted MFD and CFP
– Avoid sectoral or thematic funds
– Avoid direct equity and direct mutual funds

Also, equity investing at this stage must be goals-free and emotion-free. You are not investing to double money fast. You are investing to grow slowly with safety.

? Ideal Allocation Strategy – Balanced Growth Approach

The best approach for you is to split the annual surplus into parts:

– 60% to equity mutual funds (growth-oriented)
– 40% to debt (safety-oriented)

This way, you get:

– Growth through equity
– Stability through debt
– Flexibility for future withdrawal

Even within equity, avoid index funds. They carry no downside protection and cannot adapt during falling markets. They blindly follow the market.

Use actively managed funds across large-cap and hybrid categories. These are handled by experts. They review portfolios and shift allocations depending on market.

Don’t invest in direct mutual funds. They offer no advice, no planning support, and no behavioural guidance.

Instead, invest in regular plans through a trusted Mutual Fund Distributor with CFP credential. They will guide you on:

– Tax-efficient redemption
– Risk-adjusted portfolio updates
– Asset rebalancing each year
– Emotional support during volatility

That adds real value beyond return numbers.

? Use of Hybrid and Balanced Funds – Strong Option for You

You can use hybrid mutual funds. These have both equity and debt inside them.

They are perfect for someone in your position. You get:

– Market-linked growth
– Regular rebalancing inside the fund
– Lower volatility than full equity
– Better returns than full debt

You can make annual lump sum investments into balanced funds. Over time, it grows, but also keeps your money protected during market drops.

? Tax Angle – Keep in Mind

When selling equity mutual funds:

– LTCG above Rs 1.25 lakh is taxed at 12.5%
– STCG is taxed at 20%
– For debt funds, both LTCG and STCG are taxed as per your slab

So, keep the equity investment for at least 1 year. Plan withdrawals smartly to save tax. A CFP can help you structure this efficiently.

? Don’t Mix Investment With Insurance

Please make sure your surplus is not going into:

– Traditional LIC plans
– ULIPs
– Endowment or Money-back schemes

These give poor returns and lock your money. If you have any such policies, surrender them and invest the surrender value in mutual funds.

Take only pure term insurance (if needed) and maintain good health cover. That is enough.

? What to Avoid

At your life stage, avoid:

– Real estate investments for rental
– Direct equity or stock tips
– Sectoral or thematic mutual funds
– New fancy investment products
– Peer-to-peer lending or high-return promises
– Index funds or direct funds

All these have hidden risks or low support.

? What You Can Do Now

– Each year, once expenses are covered, calculate the surplus.
– Keep 40% of it in debt for stability.
– Put 60% in actively managed equity mutual funds.
– Use hybrid funds for ease.
– Invest via regular plans through CFP-backed MFD only.
– Keep equity money for 3-5 years or more.
– Rebalance once a year.
– Don’t withdraw unless needed. Let it grow.
– Review entire portfolio every 12 months.

This way, you are not taking risky steps. You are growing with safety.

Your golden years must be stress-free and confident. With this strategy, they will be.

? Finally – What You Should Remember

– You are already in a financially free position.
– Use equity wisely to grow surplus wealth.
– Don't fear equity – fear only poor decisions.
– Stick to balanced investing.
– Don’t listen to general advice. Your case is unique.
– Invest for stability, growth, and legacy — not just returns.
– Stay guided with a Certified Financial Planner.

You are not investing for survival. You are investing for strength. And that gives you full power to grow with confidence.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.