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Ramalingam Kalirajan |11135 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Mar 27, 2026

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 Mar 27, 2026Hindi

I have investment in hdfc flexi cap dividend plan giving dividend every year consistently. capital also grown comfortably. Now I am planning to set swp @ 10% and move the proceeds from flexi cap to balance Advantage fund dividend plan which gives monthly dividend, by reducing the equity risk to hybrid risk. So that I will get both monthly (from balance advantage) and annual (flexi cap equity) dividend and reduce the risk of equity By the way, I am 61, with no dependance and no need to leave legacy, self disciplined, self dependant with "NO ILL-NO PILL" life style. - will my decisiion is correct or need anyother correction. please guide me.!!

Ans: Your disciplined approach at age 61 with “NO ILL – NO PILL” lifestyle and self-dependence is a very strong advantage. Also, your idea of gradually reducing equity risk and creating regular income shows clear retirement maturity. You are thinking in the correct direction.

However, one important correction is needed in your strategy regarding dividend option usage.

» Important reality about dividend option in mutual funds

Many investors believe dividend plans create extra income. Actually:

– Dividend is paid from your own invested money
– NAV reduces after dividend payout
– Dividend is not guaranteed
– Monthly dividend is not assured income
– Tax efficiency is weaker compared to SWP

So depending on dividend plans for retirement income is generally not the best structure.

Growth option with SWP normally works better.

» About your idea of setting SWP @ 10 percent from flexi cap fund

Your thinking to reduce equity exposure gradually is correct.

But SWP at 10 percent yearly withdrawal needs careful review because:

– Equity returns are market dependent
– Withdrawal rate should match market cycle
– High withdrawal during correction reduces corpus faster

Better approach is controlled SWP structure rather than fixed high percentage withdrawal.

» About moving SWP proceeds into balanced advantage dividend plan

Your intention here is good:

– Reduce equity risk
– Create monthly income
– Maintain some growth exposure

But using dividend plan again reduces efficiency.

Instead:

Better structure is:

– Move SWP amount into balanced advantage growth option
– Then start SWP monthly from that fund

This creates smoother income planning.

» Why balanced advantage fund is suitable at your stage

Balanced advantage funds:

– Adjust equity and debt automatically
– Reduce downside volatility
– Support regular withdrawal strategy
– Help protect capital better than pure equity

So your selection of this category is correct.

Only option selection should change from dividend to growth.

» Suggested improved structure for your plan

A stronger retirement income structure can be:

Step 1

– Continue part investment in flexi cap fund (growth option)

Step 2

– Start moderate SWP from flexi cap fund

Step 3

– Shift SWP proceeds gradually into balanced advantage growth fund

Step 4

– Start monthly SWP from balanced advantage fund for income

This creates:

– Growth from equity
– Stability from hybrid allocation
– Monthly income support
– Better capital protection

» One more advantage in your situation

You mentioned:

– No dependence
– No legacy requirement
– Healthy lifestyle
– Disciplined approach

This gives you flexibility to manage withdrawal dynamically instead of rigid dividend dependence.

Flexible SWP strategy works best in such cases.

» Tax efficiency advantage of SWP compared to dividend

Dividend income:

– Fully taxable as income

SWP withdrawal:

– Only capital gain portion taxable
– LTCG above Rs.1.25 lakh taxed at 12.5%
– More tax-efficient structure

So SWP improves post-tax income.

» Finally

Your direction is correct:

– Reducing equity exposure gradually is right
– Using balanced advantage category is right
– Planning monthly income structure is right

But correction required is:

– Avoid dividend option
– Use growth option with SWP instead
– Withdraw at controlled rate instead of fixed 10 percent
– Keep part investment in flexi cap for long-term support

With this structure, your retirement income becomes more stable and tax-efficient.

If you share your total corpus in the flexi cap fund and your monthly income requirement, I can suggest a safe SWP level suitable for long-term sustainability.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.linkedin.com/in/ramalingamcfp/

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