My father passed away last year.He had way back in 2000 invested money in mutual funds. After his death i got the mutual funds transferred in my name. there are few mutual funds for which i am receiving payout which is credited to my saving account and i will add this amount to my total income and pay relevant income tax. There are few mutual funds where as i understand the dividend received is converted into units and added to the existing units is this taxable or i have to pay tax only when i redeem the mutual fund. IF it is to taxed than how do i find the dividend received for each mutual fund . Thanking you in advance

Ans: To achieve a sustainable monthly withdrawal of Rs. 2 lakh (Rs. 24 lakh annually), we need to identify the right mix of investments and expected returns. Let us create a detailed framework.

1. Factors to Consider Before Investing
Time Horizon: You plan to start investing after a year. This delay impacts your compounding benefit, but planning ahead mitigates it.

Expected Rate of Return (ROI): Different instruments offer varied returns. Diversification ensures both growth and stability.

Withdrawal Feasibility: Sustainable withdrawals depend on balancing withdrawals with corpus growth.

Inflation Impact: Investments must generate returns above inflation to preserve corpus value.

Risk Appetite: Choose instruments aligning with your comfort towards volatility.

Tax Efficiency: Optimise your withdrawals and investments for better post-tax returns.

2. Expected ROI for Investment Options
Here is the expected ROI and rationale for different asset classes:

Actively Managed Equity Mutual Funds

Allocation: 50% of the corpus
Expected ROI: 12% annually
Rationale: These funds provide high returns and help beat inflation over the long term.
Debt Mutual Funds

Allocation: 30% of the corpus
Expected ROI: 7% annually
Rationale: These offer stability with moderate returns and are suitable for regular withdrawals.
Fixed-Income Instruments (e.g., FDs, SGBs)

Allocation: 15% of the corpus
Expected ROI: 6-7.5% annually
Rationale: Secure returns with no market risk. Ideal for stability.
Liquid Mutual Funds

Allocation: 5% of the corpus
Expected ROI: 4-5% annually
Rationale: Quick access for emergencies or interim cash flow needs.
3. Corpus Required for Rs. 2 Lakh Monthly Withdrawal
Corpus Based on ROI
At 8% ROI: A corpus of Rs. 3 crore is required.
At 9% ROI: A corpus of Rs. 2.66 crore is required.
At 10% ROI: A corpus of Rs. 2.4 crore is required.
The corpus requirement reduces with higher returns but increases risk exposure.

Building the Corpus Over One Year
If the funds are idle for a year, invest them in liquid mutual funds temporarily. These yield 4-5% with low risk.
Use Systematic Transfer Plans (STPs) to gradually move funds into equity and debt over 12-18 months.
4. Investment Plan for SWP
Equity Mutual Funds (50% Allocation)
Allocate Rs. 1.5 crore to equity funds.
Delay SWP for at least three years to allow growth.
Equity funds ensure high long-term returns, reducing inflation's impact.
Debt Mutual Funds (30% Allocation)
Allocate Rs. 90 lakh to debt funds.
Start SWP immediately from this portion.
These funds provide stable returns and low volatility.
Fixed-Income Instruments (15% Allocation)
Allocate Rs. 45 lakh to secure instruments like FDs or Sovereign Gold Bonds.
Use these funds for stability and emergencies.
Liquid Mutual Funds (5% Allocation)
Allocate Rs. 15 lakh to liquid funds.
Use these funds for interim liquidity needs and to manage cash flow gaps.
5. Steps for Efficient Withdrawal
Start withdrawals from debt and liquid funds first. Let equity funds grow for 3-5 years.
Monitor returns annually to adjust the withdrawal rate or asset allocation.
Keep a buffer of 1-2 years' expenses in liquid funds for emergencies.
Review the tax efficiency of your withdrawals and rebalance your portfolio every year.
Final Insights
A well-diversified portfolio ensures stable withdrawals of Rs. 2 lakh monthly. Focus on equity for growth, debt for stability, and liquid funds for emergencies. Starting the plan early and monitoring it regularly will ensure financial independence.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment