Do not depend on gains from mutual funds for daily expenses. Even well-rated funds have toppled in the current market
19-Aug-2013 •Research Desk
I invested Rs 2 lakh in Birla Sun Life MIP II Savings 5 for generating regular monthly income post-retirement. What should I do with my investment in view of current debt scenario?
Although you chose a good fund, in the past few weeks, both equity and debt markets went through a rough phase. Certain unforeseen events -- mass exodus of FIIs from debt markets and sudden increase in interest rates -- resulted in unexpected losses in debt funds which are otherwise considered safe. Nobody can predict such events.
Birla Sun Life MIP II Savings 5 is a five-star rated well performing fund. The fund largely invests in debt securities with only 10 per cent allocation to equity. Over the past five years, the fund delivered returns at 11 per cent, even if investments were systematically withdrawn at 8 per cent annually. Hybrid funds are expected to deliver inflation beating returns if held for long-term and the fund has successfully done just that.
In the current scenario, depending on MIPs for recurring monthly expenses could land you in a thick soup, as the gains are not guaranteed. In fact, no mutual fund gives you the guarantee of returns of any kind. Therefore, don't rely on mutual funds to meet your day-to-day expenses, opt for something like bank fixed deposit which can give you guaranteed returns.