Debt investments for retired person | Value Research You need not start an SIP in debt schemes. It is perfectly okay to invest a lumpsum in debt funds
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Debt investments for retired person

You need not start an SIP in debt schemes. It is perfectly okay to invest a lumpsum in debt funds

I am retired and I am 63 years old. I would like to invest ₹40,000-50,000 via a SIP for the next seven years in debt funds. I want to supplement my income via Systematic Withdrawal Plan (SWP) from this investment. Please suggest a debt fund portfolio which will offer me better post-tax returns than a Recurring Deposit (RD) in a bank.
- Sunil Soni

SIP is a preferred method to invest in equity schemes because it imparts discipline and averages the cost of purchase over a period of time. Also, regular investments can rule out the possibility of committing all the money during a market peak. However, these things don't apply to debt schemes as they are not extremely volatile or risky like equity. In short, it is perfectly okay to invest a lump sum in a fixed income scheme.

We recommend dynamic bond funds to long-term debt investors. Dynamic bond funds have an actively managed portfolio that varies dynamically with the interest rate view of the fund manager. This means an investor need not take a call on interest rate movements and leave the job to the fund manager. Some may argue that long-term debt funds (income and gilt funds) may benefit more from falling rates. However, an average investor would find it difficult to take a call on interest rate movements and time the entry into and exit from these funds. That is why we ask investors to opt for dynamic bond funds.

If you want to lock-in a part of your corpus at the prevailing interest rates, you can consider investing in Fixed Maturity Plans (FMPs) of over three years.

These schemes may offer you better post-tax returns than bank deposits, especially if you are in the 30 per cent tax bracket and ready to hold your investments for over three years. Investments in debt funds held over three years qualify for long term capital gains tax of 20 per cent with indexation benefit.

You can choose one of these top-rated dynamic funds: Birla Sun Life Dynamic Bond Fund, Tata Dynamic Bond Fund, UTI Dynamic Bond Fund.


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