Mutual Funds

Your fund portfolio

K Venkatasubramanian | Updated on April 22, 2018 Published on April 22, 2018

I am 48 years old and have no debts. I am employed in the private sector with no pension. I have invested in NPS, PPF and EPF. I want to build some provision for a monthly pension after my retirement. I can invest around ₹ 40 lakh now and will need the pension only 10 years later. I have no need for life insurance or any other service. Kindly give your advice on the best way to invest.

- Raghu

It is good to note that you are debt-free a decade before your retirement. You would now be able to save in a dedicated manner and can direct cashflows towards investments for your retirement.

Before you start investing, take a medical cover for yourself and any dependants. Also opt for a term insurance policy for the next 10 years. You need not make any further debt investments as you already have sufficient exposure. Your 10-year horizon is sufficiently long. But given that you are saving towards a critical goal and are 48 now, it would be advisable to take only moderate risks with mutual-fund investments. Balanced funds and large-cap schemes would be the best options.

Spread the ₹40 lakh across four funds. You can invest ₹ 10 lakh each in HDFC Balanced and L&T Prudence — hybrid schemes with proven track records. You can park ₹ 10 lakh each in Aditya Birla Sun Life Frontline Equity and ICICI Prudential Focused Bluechip, which are quality large-cap funds.

Even the investments in these four funds can be done in a staggered manner over the next one year as markets are likely to be volatile given that several State polls are due over the next 6-8 months and the general election is expected in April-May 2019.

So you can invest ₹ 3-4 lakh in instalments with each market correction of (say) 5 per cent over the next one year.

Review your portfolio periodically.

After the 10-year period, you can invest a part of the corpus in immediate annuities offered by insurance companies (provided, rates are attractive) and the Senior Citizen Savings Scheme of the post office to derive a steady income.

If you do not want annuities from insurance companies, you can use the systematic withdrawal plan of your mutual-fund schemes to sell units and move a specific amount to your bank account for your expenses. A part of the investments (about a third) in mutual funds can be retained as you would need equity even after retirement, to convincingly beat inflation and derive reasonable capital appreciation. The remaining can be shifted to debt funds or monthly income plans.

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