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Mutual Fund plan for a just retired person
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Now, lets assume we have a just-retired person with a corpus of say 10L to live with
The idea is to get monthly income in the most assured manner as possible.
Preferably in the form of dividends so that the main corpus money is in tact
Another requirement is that the corpus shd be safe in case of a medical emergency sort of because the retired person is having health issues
Coming back to our just-retired guy, i will break my money into 4 parts from four different asset
The idea is to diversify so that i dont depend on a single asset class.. sort of de-risking
Now, for the retiring guy, my choice of four scheme types are:
1. Monthly Income Plan (with monthly-dividend payout)
2. Dynamic Bond Funds (with quarterly-dividend payout; acts as a top-up)
3. Arbitrage Funds (with monthly-dividend payout; acts as a top-up)
4. Equity-oriented Hybrid fund (with quarterly-dividend-dividend payout)
I know, this is not a tax-efficient plan but the core focus is on getting regular income rather than tax-emergency
We should have planned for retirement well in advance (or atleast 2 or 3 years in advance) but this is missed.
To be safe, we will diversify each of the fund-type to a different AMC. This helps in de-risking from being dependent on a single AMC
Since the corpus is of Rs. 10L, we will put 2.5 Lakhs in a liquid fund fund first. And then transfer funds regularly to the targeted scheme
For instance, for plan # 1, i will put Rs. 2.5L in a liquid fund and then give an instruction so that, say, Rs. 10k gets moved to the targeted MIP plan
Now this may sound difficult and redundant but the idea is to get cost-averaged units in the targeted MIP scheme
So, in 25 weekly installments, all the money will get transferred to the target MIP scheme
25 weekly switches = approximately 5 months
If you feel this is difficult to execute, you may increase the weekly switch from 10k per week to 20k per week.
The same activity can be done for Plan #2 Dynamic bond funds and #4, Equity-oriented Hybrid funds
Arbitrage funds does not require any temporary liquid scheme. So the Rs. 2.5 L can be directly invested in them
Now lets come to the choice of schemes
We will pick one AMC per plan
Plan #1: Monthly Income Plan (with monthly-dividend payout): Birla Sun Life Monthly Income Plan II - Wealth 25 Plan
Plan #2: Dynamic Bond Funds (with quarterly-dividend payout; acts as a top-up): ICICI Prudential Long Term Fund or Quantum Dynamic Bond Fund
Plan #3. Arbitrage Funds (with monthly-dividend payout; acts as a top-up): Reliance Arbitrage Fund or IDFC Arbitrage Fund
Plan #4. Equity-oriented Hybrid fund (with quarterly-dividend-dividend payout): HDFC Balanced Fund or ICICI Prudential Balanced Fund or L&T India Prudence Fund
Study the schemes and see if the desired monthly / quarterly-dividend payout options are there or not. I just gave the names that i feel are good and those i can recall.
How much payout is made MIP monthly any idea in %
11 to 12% pa
Quantum of payout varies from month to month depending on the performance of the scheme
In the Plan #1 above, the payout will be low initially and will reach its peak in the 5th month once all liquid money goes into MIP Scheme
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