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Should I Invest in Sharia Mutual Funds with SWP? A Retiree Seeks Investment Advice

Milind Vadjikar |321 Answers |Ask -Follow

Insurance, Stocks, MF, PF Expert - Answered on Sep 23, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more

Asked by Anonymous - Sep 23, 2024Hindi

Sir.. I am just retired now i want to invest in Sharia mutual funds with SWP scheme... I have 30 lakhs to invest and in SWP i could get Rs 25000/- per month... Please tell me about investment strategy... Please inform me.... SK Faruqui.. Bhopal MP

Ans: Hello; The currently available Sharia compliant funds are mostly equity rather index funds replicating Nifty 50 Sharia, Nifty 500 Sharia or similar indices.

I would not like to recommend you to invest your retirement corpus into pure equity funds since the risk is very high.

Also even if you buy immediate annuity for your corpus of 30L the possible monthly payout is 15 K(6% assumed).

You can invest corpus of 30 L in conservative hybrid debt type of fund but if you do SWP at the rate of 10% (3L annually so 25K monthly payout as desired) you run the high risk of eating away your corpus.

My suggestion is invest this corpus of 30 L in an equity savings fund (say for eg Kotak equity savings fund-growth) for 5 years, assuming 11% annual return you will reach a corpus of 50.55 L.

You can transfer this corpus to conservative hybrid debt type fund(say SBI conservative hybrid fund-growth) and do an SWP at 6% to get monthly payout of around 25K.

Other option is with this corpus you can buy an immediate annuity(6%) to get a monthly payout of around 25K.

If you are not in a position to wait for 5 years for the corpus to grow then another option is(assumed that you are 60 years of age) investing your corpus of 30L in senior citizen saving scheme. It offers quarterly payment of interest. Current rate of interest is 8.2%. So you can expect quarterly payment of 61.5 K equivalent of monthly income of 20.5K(pre-tax).

If you have any further queries feel free to revert.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing

Happy Investing!!

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