I am a 40 year old professional with a working partner and 13 year old daughter. I have 1.5 crore in savings from work projects abroad which are currently vested in NRE fixed deposits which need to be converted into resident accounts soon as per law. Also, I can invest for the next five years 1.5 Lakhs per month also through SIP in Mutual Funds.
I am working towards retirement in the next five years and want to get a plan 1.25 Lakh per month on SWP (Systematic Withdrawal Plan) by investing the entire corpus. Is it advisable to invest the entire amount in one of the strong balanced mutual funds or distribute them in a few? Can you please list some good alternatives?
—Name withheld on request
There are several things you need to work on when considering your plans to retire at 45. You have to invest the accumulated corpus efficiently in ways that help you generate better returns as you have a long-term horizon for it. Though your investment tenure may be 5 years, you should plan to keep this money invested for a long time and withdraw it every month to take care of your regular expenses.
Also, I would suggest considering inflation while deciding the monthly withdrawal amount.
In early retirement planning, inflation is a huge factor because you have many years to take care of without a fixed or regular income. 1.25 lakh will be at 6% inflation after 10 years 2.23 lakhs.
Another factor that needs to be taken into account is the number of years you plan to withdraw, usually by the age of 85. If we take these two factors, you will need a fund After 5 years Rs.3.50 crore is invested 80% in equity funds and 20% in hybrid funds for post-retirement.
Coming to investment plan, you can consider investing your monthly surplus 1.5 lakh in Equity MF for the next five years. You can see your monthly SIP 25,000 each of the following funds – UTI Nifty Index Fund, Mirae Large Cap Fund, Canara Robeco Emerging Equities Fund, Parag Parikh Flexicap Fund, IIFL Focused Equity Fund and Kotak Emerging Equity Fund.
current fund of 1.5 crore can be divided into equity and hybrid funds where you can invest 85 lakh and 65 lakhs respectively. Ideally, this investment can be made with a monthly SIP. 1.5 lakh should help you reach your goal 3.5 Crore if we assume 10% p.a. on Equity and 8% p.a. on Hybrid Fund. Among hybrid funds, you can see ICICI Balanced Advantage, Nippon Balanced Advantage, Kotak Equity Hybrid and SBI Equity Hybrid Fund. Equity funds can be similar to SIP for lump sum investment.
Harshad Chetanwala is the co-founder of MyWealthGrowth.com
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