I am a 40- year-old professional with a working partner and 13-year-old daughter. I have around ₹1.5 crore in savings from work projects abroad which are currently nested in NRE fixed deposits that need to be converted into resident accounts soon as per law. Also, for the next five years, I can invest ₹1.5 lakh per month in mutual funds via SIPs too.
I am working towards retirement in next five years and want a plan to get ₹1.25 lakh per month on SWP (systematic withdrawal plan) by investing the entire corpus. Is it advisable to invest the whole amount in one of the strong balanced mutual funds or distribute them across a few. Can you please list down a few good options?
—Name withheld on request
There are multiple things you need to work on considering your plans to retire at the age of 45. You will have to efficiently invest the corpus accumulated in avenues that help you generate better returns as you have a long-term horizon for it. Though your investment period could be 5 years, you should plan to keep most of this money invested for a long time and withdraw every month from it 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 as you have many years to take care of without a fixed or regular income. ₹1.25 lakh after 10 years at 6% inflation will be ₹2.23 lakh.
Another factor that must be taken into account is how many years you plan to withdraw, typically it could be up to the age of 85 years. If we take both these factors, you will need a corpus of ₹3.50 crore after 5 years considering the corpus is invested 80% in equity funds and 20% in hybrid funds at that stage for post-retirement.
Coming to the investment plan, you can consider investing your monthly surplus of ₹1.5 lakh in equity MF for the next five years. You can look at a monthly SIP of ₹25,000 in 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.
The present corpus of ₹1.5 crore can be split into equity and hybrid funds where you can invest ₹85 lakh and ₹65 lakh, respectively. Ideally, this investment along with a monthly SIP of ₹1.5 lakh should help you reach the goal of ₹3.5 crore if we assume a 10% p.a. return on equity and 8% p.a. on hybrid funds. In hybrid funds, you can look at ICICI Balanced Advantage, Nippon Balanced Advantage, Kotak Equity Hybrid and SBI Equity Hybrid Funds. The equity funds for investing the lumpsum can be the same as those for SIP.
Harshad Chetanwala is co-founder at MyWealthGrowth.com
