Home > Money > Question
Need Expert Advice?Our Gurus Can Help
Anil

Anil Rego  |377 Answers  |Ask -

Financial Planner - Answered on Aug 29, 2023

Anil Rego is the founder of Right Horizons, a financial and wealth management firm. He has 20 years of experience in the field of personal finance.
He’s an expert in income tax and wealth management.
He has completed his CFA/MBA from the ICFAI Business School.... more
Apurv Question by Apurv on Aug 22, 2023Hindi
Listen
Money

I am a retired person and I have recently sold my equity stocks . Now I want to invest the total amount ( about 50-60 Lacs ) in Mutual Funds . Is it advisable to do so for a retired person ? Should my portfolio also include equity MF or balance advantage fund will be more advisable ? i want above than FD returns over a period of 3 years , say about 9-10 % . Please advise me on a correct mix of MF with category & names of MF which will be safe & suitable for this . TIA.

Ans: As a retired individual looking to invest a substantial amount in mutual funds, it's important to consider your risk tolerance, investment goals, and time horizon. While mutual funds can offer potentially higher returns compared to fixed deposits (FDs), they also carry a certain level of risk based on the category of funds you choose. We suggest a combination of equity, hybrid and debt funds based on your risk appetite. For a 9-10% pre tax return, you can have about 25%-30% in equity, 30-35% in hybrid funds and 35-45% in debt. Within the hybrid category, you can use dynamic asset allocation funds significantly. Within equity, you can use a combination of large cap, flexicap and micap fund.
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.
Money

You may like to see similar questions and answers below

Ramalingam

Ramalingam Kalirajan  |6922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Sep 10, 2024

Money
Dear Dev , I am a retired person 62 yrs old . Recently I sold my equity portfolio , so I am having a spare corpus of about 60-70 lacs . I had kept this amount solely for equity/MF investments as I had also invested in FDs /Gold bonds separately .I want to invest it in an instrument which can give me less risk/good returns (above FDs & inflation beating ) , say about 9-10 % to the least in next 3 year & even better returns in the long run in my seventies /Eighties . Please illuminate me on the following- 1. Is it desirable to put this entire amount in MFs or there should be some direct investment in equities also ? 2. If Yes , what should be the ideal mix of portfolio for me ?Should it have equity ( Large cap /Mutli cap) or Balance Hybrid funds will be more suitable from the risk angle as I am a retired person ? .Please suggest an ideal mix with category & names of fund with the amount to be invested . 3.If no , then please suggest alternatives . Thanks & Regards Apurv Chandra
Ans: You’ve wisely accumulated a significant corpus of Rs 60-70 lakhs. Now, you want to ensure this money continues to grow, provides inflation-beating returns, and does so with minimal risk. Your goal of achieving 9-10% returns in the short term, while aiming for better returns in the long term, is reasonable. As a retired person, maintaining a balance between growth and safety is crucial.

Let’s delve into your questions to help craft a suitable investment strategy.

Should You Invest Entirely in Mutual Funds?
Mutual funds offer diversification, professional management, and potential for good returns. Given your situation, investing the entire corpus in mutual funds could be a prudent move. However, balancing between equity and hybrid funds can help manage risks effectively.

1. Balancing Risk and Returns
Large-Cap Funds: These invest in well-established companies, offering stability with moderate growth. They are suitable for conservative investors seeking steady returns.

Multi-Cap Funds: These invest across companies of various sizes. They offer a mix of stability and growth potential, ideal for those with a balanced risk appetite.

Balanced or Hybrid Funds: These funds invest in a mix of equities and debt instruments. They offer a buffer against market volatility, making them suitable for retired investors like you.

Given your age and goals, a balanced approach with a mix of equity and hybrid funds seems appropriate. This can provide the growth you seek while managing risk.

Direct Equities vs. Mutual Funds
Investing directly in equities can offer higher returns, but it comes with higher risks. As a retired person, your focus should be on preserving capital while achieving reasonable growth.

1. Benefits of Mutual Funds Over Direct Equities
Professional Management: Mutual funds are managed by professionals who make informed decisions, reducing the risk of poor stock selection.

Diversification: Mutual funds spread investments across various sectors and companies, reducing the impact of any single stock's performance.

Convenience: Mutual funds require less time and expertise compared to managing a direct equity portfolio.

For someone in your position, relying on mutual funds instead of direct equities offers a safer, more convenient way to achieve your financial goals.

Ideal Portfolio Mix for You
Considering your objectives, here’s a suggested portfolio mix that balances risk and returns:

1. Large-Cap Funds (30-35% of Corpus)
Stability with Growth: Large-cap funds provide steady growth with relatively low risk. They invest in well-established companies that are less volatile.

Inflation-Beating Returns: These funds typically offer returns that outpace inflation, which is crucial for preserving your purchasing power.

Suggested Allocation: Invest Rs 18-24 lakhs in large-cap funds. This will form the stable core of your portfolio.

2. Multi-Cap or Flexi-Cap Funds (25-30% of Corpus)
Balanced Growth: Multi-cap funds offer a mix of large, mid, and small-cap stocks. They provide a balance between stability and higher growth potential.

Market Opportunities: These funds can adjust based on market conditions, allowing fund managers to capitalize on growth opportunities.

Suggested Allocation: Invest Rs 15-21 lakhs in multi-cap or flexi-cap funds. This provides a balanced approach to growth.

3. Balanced or Hybrid Funds (35-40% of Corpus)
Risk Mitigation: Balanced funds reduce risk by combining equity and debt investments. They provide a cushion during market downturns.

Steady Returns: These funds are designed to offer moderate returns with lower risk, ideal for retirees.

Suggested Allocation: Invest Rs 21-28 lakhs in balanced or hybrid funds. This ensures your portfolio has a solid defense against volatility.

Alternatives to Consider
If you prefer not to invest entirely in mutual funds, there are other options to explore. These alternatives can provide additional safety or income streams.

1. Debt Funds
Low Risk: Debt funds invest in fixed-income securities like bonds, offering lower risk compared to equities.

Moderate Returns: While returns are lower than equity funds, they still beat traditional FDs, making them a safer alternative.

Suggested Allocation: If you prefer less exposure to equities, consider allocating 20-30% of your corpus to debt funds. This would provide a stable, low-risk component to your portfolio.

2. Senior Citizen Savings Scheme (SCSS)
Safe and Secure: SCSS is a government-backed scheme offering regular income with safety of capital.

Attractive Interest Rates: The interest rates are higher than regular FDs, and they are also tax-efficient under Section 80C.

Suggested Allocation: If safety is your primary concern, you could allocate 10-20% of your corpus to SCSS. This will provide regular income and peace of mind.

Final Insights
Your investment strategy should reflect your risk tolerance, financial goals, and retirement needs. Given your situation, here’s a recap of the suggested approach:

Invest 30-35% in large-cap funds for stability and steady growth.

Allocate 25-30% to multi-cap or flexi-cap funds for balanced growth.

Place 35-40% in balanced or hybrid funds to manage risk and ensure moderate returns.

Consider debt funds and SCSS as safer alternatives if you prefer less equity exposure.

This diversified portfolio is designed to achieve your desired 9-10% returns while managing risk effectively. It offers a mix of growth and security, which is crucial as you enjoy your retirement years.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ulhas

Ulhas Joshi  |279 Answers  |Ask -

Mutual Fund Expert - Answered on Aug 23, 2023

Listen
Money
Hi ! I am a retired person 62 yrs old . Recently I sold my equity portfolio , so I am having a spare corpus of about 60-70 lacs . I had kept this amount solely for equity/MF investments as I had also invested in FDs /Gold bonds separately .I want to invest it in an instrument which can give me less risk/good returns (above FDs & inflation beating ) , say about 9-10 % to the least in next 3 year & even better returns in the long run in my seventies /Eighties . Please illuminate me on the following- 1. Is it desirable to put this entire amount in MFs or there should be some direct investment in equities also ? 2. If Yes , what should be the ideal mix of portfolio for me ?Should it have equity ( Large cap /Mutli cap) or Balance Hybrid funds will be more suitable from the risk angle as I am a retired person ? .Please suggest an ideal mix with category & names of fund with the amount to be invested . 3.If no , then please suggest alternatives . Thanks & Regards Apurv Chandra
Ans: Hello Apurv and thanks for writing to me.

Note that I only discuss mutual funds in this column and so will not advise for or against any other asset classes.

To generate inflation beating returns, given that you are retired and would not like to take undue risk, I believe a mix of balanced advantage funds and multi asset funds will be ideal to invest in for a period of around 3 years. Starting SWP's from those schemes after 3 years will help you meet living expenses while your corpus continues to grow.

You can consider investing your funds equally in:
1-ICICI Prudential Regular Savings Fund
2-SBI Conservative Hybrid Fund
3-Tata Balanced Advantage Fund
4-Aditya Birla Sun Life Balanced Advantage Fund
5-Nippon India Multi Asset Fund

..Read more

Ramalingam

Ramalingam Kalirajan  |6922 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 11, 2024

Asked by Anonymous - Oct 11, 2024Hindi
Money
Hello Sir, I'm 45 years and starting my MF investment journey, I've selected the below MFs to invest in from a view for my Retirement Planning, If I intend to build a corpus of 5 Cr by 60 yrs of age, are these the right MFs to go with, or do you suggest swapping these for any better ones, kindly suggest. Also can you pls suggest how much amount should I invest lumpsum and via SIPs in these? Thank You !! HDFC Retirement Savings Fund - Equity Plan - G 15yrs(lockin 5 years) Edelwiess Mid Cap Fund - G 12 yrs DSP Health Care Fund - G 10 yrs Bandhan Nifty Alpha 50 Index Fund - G 8 yrs ICICI Pru. Equity & Debt Fund - G - 6 yrs Kotak Low Duration 2 yrs
Ans: It's great to see that you're starting your investment journey at the age of 45. You have a well-thought-out goal of building a Rs. 5 crore corpus by the time you turn 60, and I appreciate the long-term perspective you've adopted.

Let’s dive into a detailed evaluation of the mutual funds you've selected and how they align with your retirement objective. I will also provide insights on how to balance your investments between lump sum and SIPs.

Portfolio Evaluation for Retirement Planning
HDFC Retirement Savings Fund - Equity Plan (15 Years, 5-Year Lock-In)

This fund provides a balanced approach to long-term equity growth with the added advantage of tax saving. However, since it has a five-year lock-in, it restricts flexibility.

Retirement-focused funds often come with higher charges, which may impact returns over the long term. You may want to explore alternatives that offer greater flexibility and lower costs.

It's important to understand that funds specifically marked for retirement often have restrictions on withdrawals, and while that helps you stay disciplined, other diversified equity funds can offer similar returns without the lock-in.

Edelweiss Mid Cap Fund (12 Years)

Mid-cap funds can offer strong growth potential. However, they come with higher volatility. Over a 12-year horizon, the performance can be impressive, but be prepared for periods of market swings.

You could include a diversified large- and mid-cap or flexi-cap fund to balance out the higher volatility associated with mid-caps. While mid-cap exposure is good for growth, diversification will add stability to your portfolio.

DSP Health Care Fund (10 Years)

Sectoral funds, such as healthcare, are typically more volatile and focused on specific sectors. Healthcare can be a long-term growth story, but it is subject to regulatory risks and industry-specific headwinds.

For retirement planning, a more diversified approach may yield better risk-adjusted returns. Instead of concentrating on a single sector, you may want to consider sector rotation or thematic funds that give exposure to broader growth themes.

Bandhan Nifty Alpha 50 Index Fund (8 Years)

Index funds, while low-cost, tend to deliver market-average returns. In this case, the Nifty Alpha 50 Index is based on stocks with strong alpha generation potential. However, index funds lack the active management that can help capture market opportunities and mitigate risks during downturns.

Actively managed funds, handled by experienced fund managers, can outperform during volatile markets and provide you with an opportunity for higher growth. While index funds are low-cost, you may not get the most out of your investment compared to an actively managed fund.

ICICI Prudential Equity & Debt Fund (6 Years)

Hybrid funds like this one balance the risk between equity and debt. They provide a cushion during market corrections due to their debt component while also participating in equity market growth.

For a retirement portfolio, hybrid funds offer a safer route but may not deliver the aggressive growth needed for a Rs. 5 crore corpus in 15 years. These can complement your portfolio, but you may need more equity-focused funds to meet your target.

Kotak Low Duration Fund (2 Years)

Low-duration funds are primarily suited for short-term goals or as a safe parking space for funds. These funds are not ideal for long-term wealth creation due to their limited growth potential.

For retirement planning, equity exposure is essential for generating inflation-beating returns. This fund could be part of your debt allocation, but for a 15-year horizon, you should prioritize equity-heavy investments.

Recommendations for Building a Rs. 5 Crore Corpus
Based on your age and time horizon, achieving Rs. 5 crore in 15 years is a reasonable and attainable goal with the right mix of investments.

Diversification: While you’ve picked a few good funds, the portfolio can benefit from broader diversification. Rather than sector-specific or index funds, consider a mix of large-cap, mid-cap, and multi-cap funds for more balanced growth.

Actively Managed Funds: Actively managed funds often provide higher returns than index funds, particularly in the long term. Fund managers can capitalize on market fluctuations and opportunities that passive index funds cannot.

Flexibility in Retirement Funds: A retirement-focused fund with a lock-in period may limit your options. Consider funds that offer flexibility in withdrawals and fund switches for greater control over your retirement assets.

Balanced Portfolio: A good retirement portfolio should have both equity and debt components, but you should tilt more towards equity for growth in the initial years and gradually increase debt allocation as you approach retirement.

Lump Sum vs. SIP Investments
For retirement planning, the most effective way to invest is a combination of lump sum and SIPs. Here’s how I would recommend you allocate:

SIP Investments: Allocate a larger portion (around 75-80%) of your monthly savings towards systematic investment plans (SIPs). SIPs are great for rupee-cost averaging and help reduce the impact of market volatility over time. For example, if you can invest Rs. 40,000 per month, start SIPs in a diversified portfolio of equity and hybrid funds.

Lump Sum Investments: If you have any surplus funds, invest them in lump sum during market corrections or dips. Lump sum investments can be deployed in balanced hybrid funds to reduce the risk of market timing.

Taxation Considerations
Equity Mutual Funds: Long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%. Short-term capital gains (STCG) are taxed at 20%.

Debt Mutual Funds: LTCG and STCG are taxed according to your income tax slab.

You should also regularly review your investments to ensure you stay on track with your tax-saving strategies.

Suggested Action Plan
Start with SIPs: Begin monthly SIPs in a mix of diversified equity and hybrid funds, focusing on long-term growth.

Use Lump Sum Wisely: Invest any windfall gains or bonus amounts as lump sum during market corrections. Consider parking the lump sum in liquid funds temporarily and then moving it to equity funds.

Monitor and Review: Keep track of your portfolio’s performance and make adjustments based on market conditions, your changing financial needs, and tax implications.

Finally
Your goal of building a Rs. 5 crore corpus is achievable with disciplined and regular investments. By focusing on the right funds, balancing between equity and debt, and leveraging the power of SIPs, you will be able to create a strong retirement corpus.

I encourage you to stay invested for the long term, be consistent, and review your portfolio periodically. A well-diversified portfolio with a greater focus on equity will help you reach your financial goals with ease.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

..Read more

Latest Questions
Radheshyam

Radheshyam Zanwar  |1021 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Nov 04, 2024

Asked by Anonymous - Nov 03, 2024Hindi
Listen
Career
Hello Sir, I am an MBA graduate with a specialization in Marketing and HR. However, I feel that my communication skills are not up to the mark, which has made it challenging for me to secure a well-paying job. I am now considering a career switch to either the IT or Banking sector, as I have a solid foundation in digital marketing. I'm still uncertain about which path to choose. Could you suggest which industry might be better suited for me, along with the recommended courses and the process to get started? Thank you.
Ans: Hello
You completed an MBA with a specialization in Marketing and HR. You are lagging in communication skills. It seems that you have not tried to improve your communication skills hence you might have failed to get a good job in Marketing, as the marketing field is dependent on communication skills. You put two options IT and Banking Sector, Even though you have a solid foundation in Digital Marketing, you may fail in the IT sector. it would be better for you to try the Banking sector, as it has wide applications that IT. Bank is the need of each person, hence have more potential for the person who has less communication skills. Almost all the reputed banks do their advertisements on all types of media platforms. Hence a marketing person working for the banking sector has to explain less as compared to IT marketing. While working in the Banking sector, side by side you can do Digital Marketing also on a part-time basis. There is no need to do more courses as you have already done specialized courses in Marketing and HR. It would be better to keep a close watch on reputed banks' websites for the latest updates on employment.

If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

...Read more

Radheshyam

Radheshyam Zanwar  |1021 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Nov 04, 2024

Listen
Career
Hi Sir, I am tensed as JEE Main Examination is approaching and i am scared that i would only be able to score 100/300 at best. Please suggest me some good regional colleges. I am female single girl child in Delhi. Engineering was never my first priority yet I chose it because it seemed a safe option. I would also try and give CUET. One more concern is that my 5th subject in class 12 is GST or Geospatial Technology. Is there any scope for this subject through which I can enter a decent college. I dont want to spend my parents money..Please help. I am distressed
Ans: Hello Shaamhavi
First I would like to say that without any fear in mind and a predetermined score, you appear for JEE 2025 in 1st session. To improve your score/performance, you have 2nd attempt also.
You said, engineering was never your 1st priority. Then, why not have discussed this fact with your parents or parents have forced you to go for engineering? It is not clear from your question. How you can say, it is a safe option is also not clear.
If you are scared about JEE preparation, then it would be better to try CUET. GST i.e. Geospatial Technology is a good subject and there is scope in this field.
Now, I would like to suggest you: (1) Focus more on JEE preparation or CUET (2) Try to excel in GST subject (3) Try to score more and more in the respective examinations on a priority basis, (4) No need to take the stress about parents money as the expenses are already done on your classes + college tuition fees, etc. (5) Leave up all other aspects of Regional College availability, descent college in GST field etc. (6) For all your problems, only one answer: SCORE HIGH IN THE EXAMIANTIONS IN WHICH YOU ARE APPEARING.

If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x