Dear Sirs
Please review my investment towards 7.5 CR. There are 2 components towards it , 1) Generate monthly income post tax of 4 lakhs, 2) Investment Corpus Towards Capital appreciation
Towards option 1 : Investing in the following - a) Tata Motors or Chola Perpetual Bonds 1.4 cr , b) ICICI Balanced Advantage Fund 1cr, c) Kotak Balanced advantage fund 1 cr
Towards option 2 ie Capital Appreciation investing in the following - a) HDFC Flexi Cap Equity fund 1.25 cr , b) Parag Parikh Flexi Cap Equity Fund 1.25 cr, c) ICICI Prudential India Opportunities Fund 80 Lakhs, d) ICICI Prudential Multi asset fund 80 lakhs
I am looking at a 5 - 7 year investment timeline. Have taken early retirement at 50 years and need the funds to sustain myself.
Please also advise if Perpetual bonds is a good option
Thanks
Ans: Your investment strategy is thoughtfully constructed. You’ve clearly defined two components:
Monthly income of Rs. 4 lakhs
Capital appreciation with a horizon of 5 to 7 years
Let’s assess each component carefully and suggest improvements.
Monthly Income Generation Plan – Review and Insights
You’ve allocated the following towards income generation:
Perpetual Bonds – Rs. 1.4 crore
Two Balanced Advantage Funds – Rs. 2 crore
Let us look at the key strengths and areas to optimise.
Perpetual Bonds – Risk and Suitability
These bonds are issued with no maturity date.
Issuers can delay interest payments if they face pressure.
Tata Motors or Chola bonds offer high interest, but risk is also higher.
You need dependable income. Perpetuals may cause delays or cuts.
If rated ‘AA’ or lower, risk becomes even higher.
For safety, consider shifting part to high-rated corporate bonds.
Choose instruments with a defined maturity or high credit rating.
Balanced Advantage Funds – Regular Payout Source
You have allocated Rs. 2 crore to two funds here.
These are suitable for monthly SWP (Systematic Withdrawal Plan).
They reduce risk by shifting between equity and debt.
This provides smoother return and helps handle market volatility.
Ideal for your need of steady income.
Choose funds with a good track record of 5+ years.
Go for regular plans through a Certified Financial Planner.
They provide guidance and documentation support.
Key Adjustments to Consider for Income Plan
Don’t depend only on one instrument for income.
Keep part in ultra-short debt funds to manage emergency needs.
You may also allocate a small amount to floating rate funds.
Avoid riskier perpetuals if your lifestyle depends on this cash flow.
Capital Appreciation Portfolio – Review and Suggestions
You have allocated Rs. 4.1 crore across four funds:
Two Flexi Cap Funds – Rs. 2.5 crore
One Thematic Fund (Opportunities) – Rs. 80 lakhs
One Multi Asset Fund – Rs. 80 lakhs
This section looks well-structured. Still, here are some observations.
Flexi Cap Funds – Long Term Growth Drivers
These offer a mix of large, mid and small cap stocks.
Flexible allocation helps in market ups and downs.
You have spread Rs. 2.5 crore across two flexi caps.
It gives diversified equity exposure.
Good for your 5–7 year horizon.
Continue this investment.
Thematic Opportunities Fund – Aggressive but Focused
Thematic funds bet on specific trends.
They can perform well in short cycles.
But they are more volatile.
Rs. 80 lakhs is a high amount in one theme.
Reduce this to Rs. 50 lakhs.
Redirect balance to diversified equity or large-cap funds.
Multi Asset Fund – Helps Manage Volatility
These funds invest across equity, debt, and gold.
They balance returns with risk.
Ideal for medium-term wealth building.
You can continue this allocation.
Add a second multi-asset fund for balance.
Direct Plan Exposure – Re-evaluate for Personalised Support
Direct plans avoid distribution cost.
But guidance is missing.
Without CFP support, wrong fund choice or exit may happen.
Regular plans through a Certified Financial Planner give tracking.
They help during market swings, taxation and rebalancing.
This becomes very important in large-value portfolios.
Asset Allocation Review – What’s Working and What Needs Tune-Up
Your allocation is roughly:
45% towards income (Rs. 3.4 crore)
55% towards growth (Rs. 4.1 crore)
This mix looks aligned to your goal of current income and future corpus.
Still, consider the following:
Review this mix yearly with your Certified Financial Planner
If market rallies too much, shift some growth to income
If interest rates rise, reduce equity withdrawal and increase debt
Keep Rs. 25–30 lakhs in liquid fund for any large emergency
Taxation on Mutual Funds – Stay Aware of Recent Rules
Equity mutual funds:
LTCG above Rs. 1.25 lakh is taxed at 12.5%
STCG is taxed at 20%
Debt mutual funds:
Both LTCG and STCG taxed as per your tax slab
Most retirees fall in lower slab but tax planning still needed
Prefer SWP for income, not dividend option
Keep P&L statement ready for advance tax filing
Tax-Free Cash Flow – Can You Improve It?
You can also look at these steps:
Use HUF or family member’s name for part investment
Income from their investment gets taxed in their slab
Helps reduce your tax burden
Invest Rs. 1.5 lakh yearly in PPF for guaranteed, tax-free return
Can also explore Senior Citizen Savings Scheme (SCSS) if eligible
Avoid Index Funds – Not Suitable for Your Stage
Index funds copy the stock market
They don’t adjust based on conditions
There’s no downside protection in falling markets
Actively managed funds give more opportunity to earn and protect
Your current selection rightly avoids index funds
Avoid Direct Plans Without Support
Direct plans don’t include expert guidance
No one checks asset allocation or strategy alignment
You’re investing a large corpus. Mistakes cost more here
Use regular plans via an experienced Certified Financial Planner
They help in paperwork, KYC, taxation, SWP planning, rebalancing
Their personalised help adds more value than small cost savings
Perpetual Bonds – Should You Continue or Exit?
Not the best for regular income seekers
Issuer can skip interest if company faces pressure
Price of these bonds also swings with interest rates
You can’t rely fully on them for Rs. 4 lakh per month
Exit partly and shift to short-duration or banking PSU debt funds
These are better for predictable income with lower risk
Review of Liquidity and Emergency Planning
At least Rs. 30–35 lakhs should be in liquid or overnight funds
This money is for health, family needs or urgent situations
Don’t touch your income or capital funds for this purpose
This buffer will give you confidence and reduce portfolio risk
Risk Management – How to Prepare for Unseen Events
Review health insurance for self and spouse
If you’ve not already done it, get Rs. 25 lakh cover each
Consider critical illness policy to protect against long illness
Update nominations in all funds and accounts
Keep estate plan or Will ready. Talk to your planner on this
Rebalancing Strategy – Keep it Dynamic
Review portfolio every 6 months
Don’t chase top-performing funds blindly
Instead, rebalance as per your income need and age
Reduce equity by 5% every 2 years as you age
This protects corpus and supports steady cash flow
Finally
You’ve structured your Rs. 7.5 crore goal very thoughtfully
You are clear about income and long-term appreciation
Your fund choice is broadly good, with only minor changes needed
Avoid risky bonds like perpetuals as your lifestyle depends on monthly cash flow
Go for actively managed regular funds via Certified Financial Planner support
Keep tax, liquidity, insurance and emergency planning all in place
This will help you enjoy your retirement peacefully and confidently
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
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