[tbppjpr]

Originally Posted by century

I have 10L in my accounts ready to invest. I would prefer mutual funds (my father is insisting on SBI PSU Fund, SBI Contra Fund and SBI Infrastructure Fund).

SBI is top class AMC but I am not in favor of sector specific MFs unless you have specific projections in mind related to the sectors. Diversified fund which also include a few very aggressive funds for better probability will be better bet.

You can consider some other AMCs as well, all are regulated so more or less equal risk factor. Also consider some portion of the investment in gold/silver ETF based funds.

Is this right time to invest (bullish times)?

No time is right or wrong in the stock market.

Instead of putting all the money at specific time in certain funds, you can plan weekly SIPs in diversified funds to lower the risk. If market turns adversely at some point of time, you can stop and re-plan the ongoing SIPs accordingly.

[FAIAAA]

Originally Posted by century

Hi fellow BHPians,

I have 10L in my accounts ready to invest. I would prefer mutual funds (my father is insisting on SBI PSU Fund, SBI Contra Fund and SBI Infrastructure Fund).

Hi,
1. Right Time to invest - as the old adage goes, "rather than timing the market, focus on maximising time in the market". Wealth, health and love /relationships all grow through compounding.
2. Sectoral/thematic funds - Concur with what has been already said. No to sectoral funds unless you can time the entry and exit from their cycles. In this case, both PSU and Infra stocks are at their peak valuations. A good flexi cap /diversified fund will invest in the good stocks across these sectors
3. Portfolio concentration risk - check for MF overlap when picking two or more funds from same AMC/fund category

Now coming to your choices, one can look at the following diversified equity mutual funds
1. Sbi Contra ( contra investing style)
2. Parag Parikh/ HDFC Flexi Cap ( value investing)
3. Icici value discovery fund ( value investing)
And /or hybrid options with tax efficient asset allocation and better volatility management due to lower equity exposure.
1. Icici /Kotak/SBI aggressive hybrid
2. Hdfc / Tata / icici balanced advantage
3. Icici /Sbi multi asset

You can go sip route or lumpsum. In either case, please keep your investment horizon 3-5 years or more

In general, Indian markets have run up quite a lot in recent years ahead of earnings growth and hence high valuations. As such, they are susceptible to a value or time correction. So have moderate return expectations in short term and expect historical returns (12-18%) in the long term and you should be fine.

[sukhbirST]

My humble suggestion is to get hold of a financial planner because there are many variables in play and they all must be considered. Future goals and requirements require lot of understanding. Must exhaust post office schemes which give guaranteed returns and are very safe, though you may utilise banks for ease of transaction in some schemes. One example to contact is https://humfauji.in/ run by Col Govila.
I normally refer to their regular inputs which are also used by many retirees.

[zensure]

Originally Posted by LonelyPlanet

I need to park 6Cr in funds for my retirement in 2 years time and start SWP. need 1.5L/ month and looking for a 30 yr time horizon
What are the best alternatives to meet my daily needs and still account for the inflation for the time horizon.
Have no other debt / commitments

Lots of good suggestions. Adding my two cents here:

If you are going to depend on the returns of your stated corpus for your day-to-day expenses, I think, FD in BIG banks (i.e., too big to fail type of banks) will have to be a fair chunk of it - even if it is not beating the inflation and poor taxation. You may recall the recent fiasco of debt funds from Franklin Templeton fund house. Though almost all the funds were returned, it did cause disturbance in your cash flow since these funds were locked out from redemption. Even though it is one of a kind in MF industry we had other issues like IL&FS, Yes Bank lingered for a while and affected several depositors/investors across the board.

[SmartCat]

Originally Posted by zensure

If you are going to depend on the returns of your stated corpus for your day-to-day expenses, I think, FD in BIG banks (i.e., too big to fail type of banks) will have to be a fair chunk of it - even if it is not beating the inflation and poor taxation.

There are certain debt funds that are safer than FDs in the biggest PSU banks out there. But debt funds are somewhat complex and that's why we have a separate thread on that topic:
https://www.team-bhp.com/forum/shift...ebt-funds.html (Investing in debt funds)

Debt funds have multiple categories (just like equity funds). Retirees should invest only in:

- Liquid funds
- Banking & PSU Funds
- Gilt funds

Preferably an equal mix.

[eagles_ts]

Lots of well meaning advice on this thread, some accurate, some not quite accurate. Two things are apparent:

1) There is too much emphasis/ focus on security selection (which fund to invest).

It is a futile pursuit & an unnecessary one at that. To use a cricket analogy, if my required run rate is 4 runs / over there is no benefit / need to try & score at 8 runs / over. I don’t need my investments to be the best performing one, year on year. Till the time the returns at a portfolio level are ahead of my required run rate (that could be 10% for some people, 15% for someone else) I should not be too concerned with
A) Individual funds performance
B) Are my funds the best performing?

The real question is, do I know my required run rate ?

2) At a broad level, there is a lack of clear understanding on how to approach investments, yet there is a hesitation to hire a professional.

This is possibly because of a poor prior experience (bank RMs taking people for a ride, insurance mis-selling etc). However there are enough & more sincere people too. Work with them to prepare a financial roadmap for the rest of your life. A good advisor is worth far more than what he makes from you. They can help you along your journey & get you where you need to reach.

[whitewing]

Originally Posted by LonelyPlanet

I need to park 6Cr in funds for my retirement in 2 years time and start SWP. need 1.5L/ month and looking for a 30 yr time horizon
What are the best alternatives to meet my daily needs and still account for the inflation for the time horizon.
Have no other debt / commitments

In addition to the suggestions made.

Do consider the following, there are long term sovereign bonds with yields in the range of 7-7.4% pa with long tenures (30-40 year tenures) . This could serve as a kind of an annuity, the additional benefit over a standard annuity is that it would be possible to liquidate it in the (not very active) open market.

Approx 2Cr in bond will get you a post tax return of ~1L per month. The rest of the corpus can be put in avenues the other members have indicated (mix of equity/debt funds). Giving you more leeway to withstand market variations without having to touch the principal amount.

This approach is not the most efficient from a taxation p.o.v, but one that gives a sense of security, since one is assured of getting this base amount irrespective where the equity/bond markets are headed.

[FAIAAA]

Originally Posted by eagles_ts

Lots of well meaning advice on this thread, some accurate, some not quite accurate. Two things are apparent:

1) There is too much emphasis/ focus on security selection (which fund to invest).
The real question is, do I know my required run rate ?
2) At a broad level, there is a lack of clear understanding on how to approach investments, yet there is a hesitation to hire a professional.

Agree, that's a good idea for those who don't have the time nor the inclination to understand this topic. Finding a good advisor is a challenge though - for example, I haven't found a single financial advisor who advises less than 8-10 MFs (some of my friends run 15-20 MF plans) and invariably will advise closure of existing quality plans. Plus the 0.5-1.5% commission life long , gap between Direct & Regular plans, makes a big difference on a large corpus over time (one can do the math, it can be 3-15 lacs annually).One option is seek their advice on portfolio, Run a small portfolio with regular plans with them and set up a mirror portfolio with same funds but direct plans on apps like Groww.
However for those who are keen to understand (and I would suggest one does. After all, it's their hard earned money), there is a lot of information /actionable insights available online which demystify and simplify the entire topic. To name a few - ET Money, Groww, Mutual Funds' shows on CNBV TV18, ET NOW, NDTV Profit (just search for them on Youtube). Stick to known/verified sources (as opposed to zillion Fin Influencers) and one should be fine. Apps like ET Money provide ranking by category, while you can check current portfolio, past track record, risk & return ratios etc. on Groww/ET money. (For example, higher returns within a category can mean riskier bets - Small caps in Equity, lower grade bonds in debt)

[srsrini]

Originally Posted by SmartCat

I'm with sagarpadaki on this one. If one is finding it difficult to identify the right mutual funds, fee based service provider is the way to go. The service provider should NOT have an incentive to grow the wealth beyond a reasonable level. Because, if he does, he will be taking higher risk. This is called 'risk-return tradeoff'

...

Ergo, you cannot have higher returns without taking higher risk.



With this performance incentives based plan, the risks and rewards are skewed hugely in favor of the service provider, and not the retiree.

...

I could not resist joining this conversation. (Disclaimer: I am listed in one of the lists mentioned in a previous comment.)

While 'aligned interest' is indeed a good point, we also have to be careful about what the interest is. For the person who initiated this discussion, they want stress-free 'income' to meet their expenses for many decades, and this has to come from the corpus they have. They don't really need to get superior returns from the equity and debt portions of the corpus. Their interest is only to meet the expenses, and hopefully with a buffer.

If the 'interest' is defined this way, it definitely does not align with that of a 'wealth manager' who is looking to generate alpha always.

And I have to point out that once a person starts to 'pool' from more than a few people, the regulations would prefer if this becomes a PMS and/or AIF.

[SmartCat]

Originally Posted by srsrini

(Disclaimer: I am listed in one of the lists mentioned in a previous comment.)

Amazing.

For readers of this thread, do expand a bit more on how one should find & select a retirement planner, pitfalls if any and what to watch out for.

[bini10]

Adding a few books I found helpful while on a similar journey to be financially knowledgeable:

A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy

Let's Talk Money: You've Worked Hard for It, Now Make It Work for You

Money wise: Timeless Lessons on Building Wealth

They cover almost all basic facets of investing and psychology behind it.

[argchoff]

Recently on reddit i came across some comments on the mutual funds thread about surcharge on redemption profits being 10% on all redemptions over 50 lakhs capital gains. This seems to be too much.

Please could someone explain how this is calculated? Suppose the capital gains (profit) on redemption is 90 lakh rupees. What i understand is there will be 12.5% tax on 50 lakhs (1.25 lakh exempt). So how does the extra 40 lakh capital gain get taxed? Is it taxed at 12.5+10=22.5%??

If so this sounds too much.

[somersault]

Originally Posted by LonelyPlanet

I need to park 6Cr in funds for my retirement in 2 years time and start SWP. need 1.5L/ month and looking for a 30 yr time horizon
What are the best alternatives to meet my daily needs and still account for the inflation for the time horizon.
Have no other debt / commitments

I was in a similar situation some time back and although I was not on the verge of the retirement age (38 years age), I was investing in my startup company. So left the job and this is how I planned.

1. 50% of the savings were invested in Blue chip mutual funds. (Icici Blue Chip and Aditya Birla specifically). This corpus was do not touch corpus.
2. Rest 50% was invested in Fixed deposits, out of which half was a reputable bank offering reasonable ROI at that time and rest was divided into post office and other similar sovereign instruments. The debt investment was invested to give monthly return (similar to my salary).

So on one side I had a steady income and on other side my investment was growing as the stock market was going up. As I am now getting good stability in my overall income, I am moving part of my debt investment into equity investment but only blue chip.

Why blue chip only - As I did not want to take any major risk in the equity but also have reasonable return. My return in equity is 21% CAGR.

Why these mutual funds - No specific choice. I selected these as per my selection from top 5 at the time of investment. I was not looking for best return but was looking for reasonably good return. So was not bothered about which mutual fund is giving me best return. I wanted to enjoy my life tension free on this front.

In your case, I would do following.
1. Invest 50% or 3 CR with fixed deposits. so 7.25% for 2 years in ICICI Bank will give you 180,000 per month pre-tax, 150,000 post tax per month. After 2 year, again invest for the best of tenure and the ROI at the time of renewal or move part of it into equity mutual funds.
2. Invest 2.8 CRs in blue chip mutual funds and will grow at whatever level but it will surely grow. As the blue chip companies will keep on growing.
3. I will keep 20 Lakhs in a non locking bank deposit, in multiple of 5 lakhs each, as my contingency fund. The FD can be used to take OD against the FD for for my travel plans etc if needed.

This way, I will have a regular steady income, I will have a contingency fund and my net work with grow in the long term. As the mutual fund grows, I will start moving some of my FDs into mutual funds over a period of time. Say in 5 year, the invested 2.8 Cr becomes 3.5 Crs, I will probably transfer 50 lakhs of FDs into mutual funds to make the distribution as 2.5 Cr in FD, 20 lakhs in contingency fund and (3.5 + 0.5 =) 4 Cr as mutual funds. This cycle I will keep on repeating till my monthly FD income is up to say 50K, where the income < 7 lakhs is tax free. Whatever extra money I will need later on, I can withdraw from my mutual funds in suitable time. Remember, the growth in the mutual fund is already there at that time.

When will I invest in mutual funds -
1. For initial investment, looking at the sensex graph, whenever there is some 2% or more drop from the peak, I will invest about 30-50 lakhs in mutual funds each time, to complete the 3 Cr. This investment will be direct into the mutual funds and not through 3rd party
2. In future, a similar strategy I will offer to invest in mutual funds to transfer my FDs into mutual funds.

Then I will forget the mutual funds and enjoy my life with my regular monthly income and occasionally withdrawing my additional needs from the increase in the mutual funds (e.g Car purchase etc).

[m8002?]

Originally Posted by somersault

I was in a similar situation some time back and although I was not on the verge of the retirement age (38 years age), I was investing in my startup company. So left the job and this is how I planned.

Arent you missing out inflation for day to day expenses in this whole calculation? The OP needs 1.5 lacs per month today - meaning 2.5 lacs per month after 10 years, 4 lacs per month after 20 and 5 lacs per month around 30? You withdrawl shows 1.5 lacs per month for all 30 years.

[somersault]

Originally Posted by m8002?

Arent you missing out inflation for day to day expenses in this whole calculation? The OP needs 1.5 lacs per month today - meaning 2.5 lacs per month after 10 years, 4 lacs per month after 20 and 5 lacs per month around 30? You withdrawl shows 1.5 lacs per month for all 30 years.

No. My point was, in the initial period, it is better to have a regular salary like income (which the FD gives). Over the period the corpus in mutual fund grows and hence the net worth grows. Additional withdrawal happens from that corpus after few years as you go on reducing your FDs. Your mutual funds of 2.8 Cr will grow at a healthy rate of more than the inflation and the additional amount can be withdrawn from that growth while still ensuring some growth in the original corpus. Eventually the person will only have 50K from FD and rest of the needs from the mutual fund growth.

I am just explaining my experience and my style of execution which worked for me. I am doing this for last 7 years now and my total net worth is more than what I invested initially after deducting my travel, education and car needs etc with a decent return.