Corpus fund of 20 Lacs, any monthly income scheme

Ans: Hi Abhisheke, thanks for writing to me. To create a corpus of Rs.40 Lakh 8 years, you need to invest Rs.25,000 every month.

You can begin SIP's in:
1-Edelweiss NIFTY 100 Quality 30 Index Fund-Rs.5,000
2-UTI NIFTY 50 Index Fund-Rs.5,000
3-Axis ESG Fund-Rs.5,000
4-SBI Focused Equity Fund-Rs.5,000
5-DSP Quant Fund-Rs.5,000

Stepping up your SIP's every year by 10% or more will help you create build your corpus faster.

Ans: To achieve a corpus of 10 crore in 10 years with a monthly investment of 2,00,000, you'll need a disciplined and aggressive investment strategy.

Firstly, let's break down the math.

10 crores in 10 years means you need to aim for an annual compounded growth rate (CAGR) of approximately 20%. It's a tall order, especially considering market fluctuations and uncertainties.

A diversified portfolio is essential. You might consider allocating your investments across various asset classes like equity, debt, and possibly real estate or other alternative investments. Equity investments, historically, have offered higher returns over the long term but come with higher volatility. Debt can provide stability and income generation.

In the equity portion, focus on a mix of large-cap, mid-cap, and small-cap funds to balance risk and return. For the debt component, consider high-quality corporate bonds or debt mutual funds for stability.

Regularly review and rebalance your portfolio to ensure it stays aligned with your goals. As the saying goes, "Rome wasn't built in a day." Similarly, building a 10 crore corpus will require patience, discipline, and sound investment decisions. Consulting with a financial advisor can provide personalized guidance tailored to your needs and help navigate the journey towards your financial goal.

Ans: At 60, having a corpus of Rs.3.5 crore with no liabilities is indeed commendable. Your disciplined approach with a monthly SIP and a pension adds to your financial stability.

To generate 1.5 lac per month from a corpus of Rs.3.5 crore, a withdrawal rate of around 5% annually would be required. However, it's essential to consider factors like inflation, potential medical expenses, and unforeseen financial needs that might arise during retirement.

Have you factored in the impact of inflation on your monthly expenses? With rising costs, the purchasing power of money diminishes over time. It's crucial to ensure that your corpus grows at a rate higher than inflation to maintain your desired lifestyle.

A Certified Financial Planner can provide a detailed analysis, considering your financial goals, risk tolerance, and investment horizon. They can guide you on optimizing your portfolio, ensuring a balance between growth and income to meet your monthly requirement and safeguard the corpus for the future.

Remember, retirement is a phase to enjoy the fruits of your labor, cherishing moments with loved ones. Ensuring a well-planned financial roadmap ensures peace of mind, allowing you to embrace retirement with confidence and joy.

Ans: Crafting a Monthly Income Strategy for Your Corpus Fund of Rs 20 Lakhs

Understanding Your Investment Goals

To create a monthly income from your corpus fund of Rs 20 lakhs, we need to understand your financial goals and risk tolerance.

It’s crucial to balance risk and returns to maintain financial stability.

We aim to provide a steady income stream while preserving and potentially growing your capital.

Allocating Your Investment Corpus

A well-diversified portfolio is key to achieving a steady income and capital preservation.

We will discuss various investment options that suit your needs.

Fixed Deposits and Monthly Income Schemes

Fixed Deposits (FDs) offer safety and regular income. Banks provide options for monthly, quarterly, or annual interest payouts.

Monthly Income Schemes (MIS) from post offices are another safe option. They offer regular monthly payouts, though the returns are moderate.

Debt Mutual Funds

Debt mutual funds invest in bonds and fixed-income securities, providing regular income with lower risk compared to equities.

They come in various types, including short-term, medium-term, and long-term funds. Choosing the right one depends on your investment horizon and income needs.

Corporate Bonds and Non-Convertible Debentures (NCDs)

Corporate bonds and NCDs can offer higher interest rates than traditional FDs. They come with varying credit ratings.

Investing in high-rated bonds reduces risk, while slightly lower-rated bonds can provide higher returns.

Systematic Withdrawal Plan (SWP) in Mutual Funds

An SWP allows you to withdraw a fixed amount from your mutual fund investments regularly. This can provide a steady monthly income.

You can invest in equity or hybrid funds, which have potential for growth while offering regular withdrawals.

Balanced Advantage Funds

Balanced Advantage Funds dynamically allocate investments between equities and debt based on market conditions.

These funds aim to provide growth with reduced volatility, making them suitable for monthly income and capital appreciation.

Senior Citizens' Savings Scheme (SCSS)

SCSS is a government-backed scheme offering regular income for individuals above 60. It provides higher interest rates than FDs and MIS.

The interest is paid quarterly, ensuring regular income for retirees.

RBI Floating Rate Savings Bonds

These bonds offer interest rates linked to government securities, providing a hedge against inflation. Interest is paid semi-annually.

They are safe investments with guaranteed returns, suitable for conservative investors.

Diversification for Risk Management

Diversifying your portfolio across various asset classes reduces risk and ensures a steady income stream.

Combining safe options like FDs and SCSS with growth-oriented mutual funds and corporate bonds can optimize returns.

Regular Monitoring and Rebalancing

Regularly monitoring and rebalancing your portfolio is essential. It ensures that your investments align with your financial goals and market conditions.

Understanding Tax Implications

Different investment options have varied tax implications. It’s important to choose tax-efficient investments to maximize your returns.

Consulting a Certified Financial Planner (CFP) can help in making tax-efficient investment decisions.

Disadvantages of Index Funds

Index funds mirror market indices, offering average market returns. They lack flexibility and can’t adapt to market changes.

Actively managed funds, on the other hand, aim to outperform the market by selecting the best-performing securities.

Benefits of Actively Managed Funds

Actively managed funds have professional fund managers who make strategic decisions. They have the potential to provide higher returns than index funds.

Investing through a Mutual Fund Distributor (MFD) with a CFP credential ensures expert guidance and better fund selection.

Disadvantages of Direct Funds

Direct funds require investors to select and manage investments themselves. This can be time-consuming and challenging without financial expertise.

Regular funds, managed by professionals, offer the benefit of expert advice and active management.

Building a Customized Plan

A customized investment plan tailored to your financial situation, goals, and risk tolerance is essential.

A CFP can help design a strategy that provides regular income while preserving and growing your corpus.

Conclusion

Creating a monthly income from a corpus fund of Rs 20 lakhs requires a well-thought-out strategy.

Diversifying across various investment options ensures a steady income and capital preservation.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in