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In which fund categories should a retiree invest?
- Ashwini
This is a very important question. Most people have an impression that once we retire, we must not take any risk. So, we avoid equity. But it all depends on whether you want the investment to support you with regular income. If you are dependent on this investment for regular income, then you may choose an aggressive hybrid fund, as you would need stability. This fund comes with a 65-35 equity and debt allocation. While the in-built debt portion acts as a cushion, the equity portion helps in generating inflation-beating returns.
A more conservative approach could be to go with a balanced fund, which maintains a 50:50 asset allocation. One should also ensure to have a withdrawal rate that is both pre-defined and thought through. A four-seven per cent of a withdrawal rate from an aggressive hybrid fund should be able to support reasonable income.
However, if you have other means like a pension or rental income and your only goal is to accumulate a larger corpus out of this money, then the focus should be completely on multi-cap funds.
This article was originally published on September 26, 2019.
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