I am about to retire in a month and want to have regular income from my funds, which are worth Rs 1.5 crore. I have my own house and no liabilities. I have zero appetite for risk. Please suggest how to generate about Rs 1 lakh per month.
Anupam Guha, Head, Private Wealth Management, ICICI Securities:
An assumption of Rs 12 lakh per annum today would be about Rs 35 lakh per annum 22 years from now, assuming 5% inflation and life expectancy of 80 years. A risk-averse portfolio will give a lower post-tax return of 6.5-7%. The corpus of Rs 1.5 crore, if invested in a risk-averse option, with Rs 1 lakh monthly outflow, will last for only 14 years. This may entail the need for an additional corpus of about Rs 65-70 lakh. You could consider a systematic withdrawal plan (SWP) from debt mutual funds, bonds or annuity plans. You may also want to include your PPF/EPF investments in the computation or try increasing your corpus to ensure no slippages. We assume you have enough health cover. Alternatively, at close to half of equity market risk, you can bring Rs 30 lakh investment and invest in balanced advantage funds or a basket of hybrid funds with a slightly higher risk (9-12% returns). If the corpus cannot be raised, this strategy will last for about 19 years. You can also consider ICICI Mutiasset Fund, which comes with higher risk, but a well-diversified portfolio across asset classes, which can potentially help you achieve your target.
I am retiring on 30 November 2023. I shall get Rs 75 lakh from my PF and gratuity. My PPF balance is Rs 25 lakh. I shall get Rs 75 lakh in November 2025 from a Ulip. We are a family of three and live in my own house in the suburbs of Kolkata. I don’t have any financial liabilities. I want to earn Rs 50,000 per month from my savings. Please advise.
Dev Ashish, Founder, StableInvestor, and Sebi-registered investment adviser: We can use a two-bucket system to generate Rs 50,000 a month after your retirement. First, put Rs 30 lakh in the Senior Citizens’ Savings Scheme, which, at 8.2% per annum, will generate Rs 2.46 lakh in annual interest income. Put another Rs 30 lakh in bank FDs, which will give 7-7.5%. This will give another Rs 2.2 lakh in interest income. Third, assuming your PPF account with Rs 25 lakh has completed its first 15 years and is in a five-year extension period with contribution, you can make one tax-free withdrawal each year. At 7.1%, an interest income of Rs 1.7 lakh is generated each year, which you can withdraw, leaving the principal of Rs 25 lakh intact. The FD portfolio can also act as an emergency/medical contingency fund and an ongoing liquidity reserve. The remaining Rs 15 lakh can be invested in equity to grow and generate inflation-beating returns, if your risk appetite allows it. The money can be diversified and put in 2-3 schemes from categories like large-cap index funds, flexi-cap funds, and aggressive hybrid funds. The corpus of Rs 75 lakh in Ulip, which will become available only in 2025-26, can also be deployed in these two buckets based on the market conditions and any change in your income or other requirements. You also need to make sure that you have adequate health insurance in place.
I am 23 years old. What should be the ideal percentage of equity, debt and gold in my portfolio? How should I increase or decrease this share as I grow older?
Naveen Kukreja, Co-founder and CEO, Paisabazaar.com:
The ‘rule of 100’ is one of the most recommended agebased asset allocation strategies. An investor’s age is subtracted from 100 to determine the equity exposure in his portfolio, with the rest invested in fixed income and other asset classes. However, asset allocation should also factor in your risk appetite, time horizon of goals, liquidity needs, and investible surplus. For financial security, create an emergency fund to cover your unavoidable expenses for at least 6-12 months. You can park this money in liquid funds, short duration debt funds, or a sweep-in fixed deposit. Purchase adequate health insurance of at least Rs 30 lakh, and if you have dependants, buy term insurance that is 10-15 times your annual income. While you have not shared any details about your investible surplus, financial goals or risk appetite, I am assuming you have a high risk appetite, given your age. However, equity can be very volatile in the short term. Hence, any contribution towards financial goals maturing within three years should be parked in debt funds or fixed deposits offering 8% and above. The rest of your monthly investible surplus can be spread between equity mutual funds, fixed income instruments and gold instruments in the ratio of 80:15:5. For your fixed income portfolio, you can consider investing up to Rs 1.5 lakh a year in the PPF and the rest in high-yield bank fixed deposits. For your equity portfolio, distribute the monthy equity contribution equally among flexi-cap, large-cap index and aggressive hybrid fund categories, through SIPs. Invest in the sovereign gold bonds (SGB) through secondary markets for exposure to gold. Apart from capital appreciation, SGBs offer an interest income of 2.5% annually on the nominal value of investment. SGBs held in a demat account can be redeemed in the secondary market before their maturity and without any lock-in period. Make sure that you review your portfolio at least once a year, especially during steep market corrections, and rebalance your portfolio to restore the set asset allocation ratio. Continue with this asset allocation till your retirement and then increase the fixed income portion of your portfolio, if required, after factoring in your post-retirement income, accruals and monthly expenses.
I am a 28-year-old employee and my monthly income is Rs 44,000. I invest Rs 2,000 per month in mutual funds, Rs 5,000 in the PPF and Rs 4,000 in a recurring deposit. About 10% of my salary gets deducted for the NPS, and I also put in Rs 50,000 per year in life insurance. I want to invest more in mutual funds. How should I proceed?
Dev Ashish, Founder, StableInvestor, and Sebi-registered investment adviser:
It’s a good idea to increase your investments. You have not provided any details of the mutual funds or schemes for your Rs 2,000 monthly SIP. You have also not mentioned how much more you want to invest in mutual funds. Since your debt allocation primarily comprises the PPF, NPS and a recurring deposit in your portfolio, and age is on your side, mutual funds should be used to increase the equity exposure, with a long investment horizon. Till the time your monthly investment in mutual funds is below Rs 10,000, you can invest in just one fund, and can opt for a good flexi-cap fund. If you wish to diversify more and have at least two funds, then you can have one scheme from the large-cap/flexi-cap category and one from mid-cap funds. As your income increases, try to raise your monthly investments every year. If you get any annual bonus or incentives, you can channel a part of these as well towards your savings, provided you don’t need it for other expenses or family requirements. The sum of Rs 50,000 you pay annually for life insurance seems to be for a traditional endowment plan. If this is the case, purchase a pure protection term insurance as well, which will not cost a lot given your age.
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