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Ramalingam Kalirajan5019 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 17, 2024

Asked on - Jul 17, 2024Hindi

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To get a month income of Rs 30000 what should my MF corpus and which fund shoukd I opt?
Ans: To earn a monthly income of Rs. 30,000 from mutual funds, the primary objective is to build a sustainable corpus.

Estimating the Required Corpus
To achieve a monthly income of Rs. 30,000, we need to calculate the total corpus. Assuming a conservative annual withdrawal rate of 4%, we can derive the needed corpus.

Choosing the Right Mutual Funds
When selecting mutual funds for this purpose, it's crucial to focus on specific types of funds that align with your goals. Here are key points to consider:

Diversified Equity Funds
These funds invest across various sectors.
They balance risk and reward.
Hybrid Funds
These funds mix equity and debt.
They provide stability and growth.
Monthly Income Plans
These plans focus on regular payouts.
They are suitable for generating steady income.
Benefits of Actively Managed Funds
Actively managed funds have several advantages over index funds:

Professional Management: Certified financial planners oversee the investments.
Flexibility: Fund managers can adapt to market changes.
Potential for Higher Returns: Skilled managers can outperform benchmarks.
Disadvantages of Direct Funds
Direct funds might seem cost-effective but have certain drawbacks:

Lack of Guidance: Investors might miss expert advice.
Higher Risk: Without a certified financial planner, risks might be higher.
Benefits of Regular Funds
Investing through a certified financial planner provides these benefits:

Expert Advice: Ensures informed decisions.
Risk Management: Helps in balancing risk.
Personalized Strategy: Tailors investments to your needs.
Building a Sustainable Corpus
Here’s a step-by-step approach to building your corpus:

Step 1: Assess Your Current Investments
Evaluate your existing mutual funds and other investments.

Step 2: Diversify Your Portfolio
Ensure your portfolio includes:

Diversified Equity Funds
Hybrid Funds
Monthly Income Plans
Step 3: Regular Contributions
Continue regular investments through SIPs. This ensures consistent growth.

Step 4: Rebalance Periodically
Review and adjust your portfolio periodically with your certified financial planner.

Final Insights
Achieving a monthly income of Rs. 30,000 from mutual funds is attainable with a well-planned strategy. Focus on a mix of diversified equity funds, hybrid funds, and monthly income plans. Regular investments, periodic reviews, and guidance from a certified financial planner will ensure you reach your goal.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
(more)
Ramalingam

Ramalingam Kalirajan5019 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 23, 2024

Asked on - Feb 16, 2024Hindi

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Money
Advice required regarding SWP in mutual funds?For monthly expenses how much percentage one can withdraw from mf corpus?
Ans: Understanding SWP in Mutual Funds
SWP (Systematic Withdrawal Plan) in mutual funds is an effective strategy for generating regular income in retirement. Let's delve into the key aspects of SWP and determine the optimal withdrawal percentage for monthly expenses.

Exploring SWP in Mutual Funds
SWP allows investors to withdraw a fixed amount at regular intervals from their mutual fund investments.

It offers flexibility in managing cash flow, ensuring a steady stream of income to meet living expenses.

SWP is suitable for retirees or individuals seeking supplementary income from their investment portfolio.

Determining Withdrawal Percentage
The withdrawal percentage from the mutual fund corpus depends on various factors:

Investment Horizon: Consider the duration for which you need the income and the sustainability of withdrawals over time.

Return Expectations: Assess the expected returns from your mutual fund investments to determine a sustainable withdrawal rate.

Risk Tolerance: Factor in your risk tolerance and the potential impact of market fluctuations on the withdrawal amount.

Optimal Withdrawal Percentage
While there's no one-size-fits-all approach, a withdrawal percentage of 3-4% of the mutual fund corpus is generally considered sustainable:

Preservation of Capital: A conservative withdrawal rate ensures the preservation of capital for future needs and unexpected expenses.

Longevity Risk: Lower withdrawal percentages mitigate the risk of outliving your savings, especially in the case of longer life expectancies.

Market Volatility: Conservative withdrawal rates provide a buffer against market volatility, ensuring a consistent income stream regardless of market conditions.

Benefits of SWP
SWP offers several benefits for investors:

Regular Income: Provides a steady stream of income to meet monthly expenses and maintain a desired lifestyle in retirement.

Flexibility: Allows customization of withdrawal frequency and amounts based on changing financial needs and market conditions.

Tax Efficiency: Depending on the investment holding period, withdrawals from mutual funds may attract favorable tax treatment compared to other income sources.

Drawbacks of SWP
Despite its advantages, SWP has some limitations:

Market Risk: Withdrawals from mutual funds are subject to market fluctuations, impacting the withdrawal amount and potentially eroding the investment corpus.

Inflation Risk: Fixed withdrawal amounts may not keep pace with inflation, reducing purchasing power over time if not adjusted periodically.

Tax Implications: Depending on the mutual fund category and holding period, withdrawals may incur capital gains tax, affecting overall returns.

Conclusion
SWP in mutual funds is a valuable tool for generating regular income in retirement. By determining an optimal withdrawal percentage based on your financial goals, risk tolerance, and investment horizon, you can ensure a sustainable income stream while preserving capital for the future.

Regular review and adjustments to the withdrawal strategy are essential to adapt to changing financial needs and market conditions effectively.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
(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.

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