How should I invest my retirement fund in mutual fund to generate a regular monthly income?
— C Venkatesh
In mutual funds, pension funds invest in a mix of equity & debt ranging from 30% to 100% in equity and the rest in debt, during the pre-retirement phase and typically up to 40% in equity during the post-retirement phase. Post–retirement, one can withdraw from the scheme using a Systematic Withdrawal Plan (SWP), either at a monthly, quarterly, semi-annual or annual frequency. The SWP amount can be fixed at the time of retirement and would continue till the investment corpus is exhausted. Since the corpus is invested in market-linked instruments it could fluctuate based on the market value of the underlying holdings. Based on one’s risk appetite other hybrid funds like Monthly Income Plans (MIPs) can also be considered, wherein the allocation to equity ranges from 5% to 30%. If a lumpsum investment is made, an SWP could start after three years to avoid higher debt taxation. Tax benefits outlined above are not available for investments in MIPs or other
I want to save some money in a gold fund for my daughter. Can I invest every month in the fund and can I redeem the units in gold?
— Rahul Gupta
Most AMCs provide Systematic Investment Plan (SIP) or Systematic Transfer Plan (STP) modes of investment into Gold Savings Funds. Further, a few AMCs also provide an option of defining the SIP in terms of quantity of purchase desired. In such cases, the value of investment or SIP would be dynamic and vary depending on the NAV of the fund. On redemption, the value of holdings (or units) based on the prevailing NAV would be provided and the units cannot be redeemed in gold.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India)