I was at PSU and have recently got VRS of Rs 50 Lakh. I am 50 years old. Please tell me how to manage this corpus. My monthly expenses are Rs 30,000-40,000.
Name withheld on request Reply by Sushil Jain, CEO, PersonalCFO.in
We always follow the “Cash Income and Growth” approach to manage funds after retirement. In this case, we assume that you have sufficient funds for emergency purposes and will advise you on how to generate regular income as well as grow funds.
The first step for any investment plan is to do your risk profiling. We will plan for all 3 risk profiles, Conservative, Moderate and Aggressive.
If you are a conservative investor, then you should distribute your fund in the following manner.
Debt Hybrid –Rs.35,00,000
Equity Hybrid – Rs.10,00,000
Equity – Rs. 5,00,000
Assuming the monthly expenses are Rs 30,000 which will be redeemed from a debt hybrid fund as SWP (SWP-A Systematic Withdrawal Plan is a facility extended to investors allowing them to withdraw a fixed amount from a mutual fund scheme regularly) for regular income and appreciation of the remaining amount will help in growing the principal amount.
Despite the conservative approach we have to take exposure into equity as pure debt like Fixed Deposit or Post Office Monthly Income Scheme will not give us the desired return. The equity should hold for a longer period of at least 10 years before starting SWP from the equity portion.
If you are a moderate investor, then you should distribute your fund in the following manner.
Debt Hybrid –Rs.25,00,000
Equity Hybrid – Rs.15,00,000
Equity – Rs.10,00,000
Assuming the monthly expenses are Rs. 35000 which will be redeemed from a debt hybrid fund as SWP for regular income and the appreciation of the remaining portion will help grow the principal amount. The equity should be held for a period of at least 7 years before starting SWP from the equity part.
If you are an aggressive investor, then you should distribute your fund in the following manner.
Debt Hybrid –Rs.15,00,000
Equity Hybrid – Rs.20,00,000
Equity – Rs.15,00,000
Assuming the monthly expenses are Rs. 40,000 which will be redeemed from the debt hybrid fund as SWP for regular income and appreciation of the remaining part will help grow the principal amount. The equity should be held for a period of at least 3 years before starting SWP from the equity part.
Assumptions
Return on Debt hybrid fund – 8%
Return on Equity hybrid fund – 10%
Return of equity fund – 12%
Tax Slab – Nil
If you are a conservative investor and your monthly expenses are more than Rs.30,000 then you need to either take extra risk than your profile ( which is generally not advisable) or you need to manage your cash flow more efficiently so that your monthly expenses will minimize.
Alternatively (which is advisable also) you need to start doing something you like and generate income. It will help you to maintain yourself fit and fine. We also assume that you have sufficient health and life insurance. Last but not least you must have your Will in place as Estate Planning.
Schemes for Investment
Debt Hybrid Fund
1) Kotak Debt Hybrid Fund
2) SBI Conservative Hybrid Fund
Equity Hybrid Fund
1) ICICI Prudential Equity & Debt Fund
2) Kotak Equity Hybrid Fund
Equity- Large Cap
1) Nippon India Large Cap Fund
Equity- Large& Mid Cap Fund
1) ICICI Prudential Large& Mid Cap Fund
2) SBI Large & Mid Cap Fund
Equity – Mid Cap Fund
1) Motilal Oswal Midcap Fund
2) HDFC Mid Cap Opportunities Fund.
(Views expressed by the investment expert are his/her own.)
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