Like many other NRIs, I am thinking about returning to India in the next four-five years. To have less financial burden after that, is it a good idea to start investing now in three-four multi-cap funds to generate monthly income immediately once I come back? As you suggest, my withdrawal rate will be 5-6 per cent per year.
- Akhil Raj
Yes, it is a good idea and you should start working towards your financial independence. You should think in terms of building as much accumulation (whatever be the investment) that 5 to 6 per cent withdrawal should be enough to take care of your income requirement.
And if you can do it earlier, the better. Just make sure to keep investing in equity till the time you don't need this money. Once you get into the income withdrawal mode, then you will have to do some degree of planning in terms of moving a part of your asset to a stable asset class. You can consider moving your three-year income requirements to fixed-income funds. This way, you will be insulated or sealed from the anxiety that the equity market's ups and downs will cause.
So, till that point, save as much as you can and invest regularly in three-four multi-cap funds. It's a good idea and it will come in very handy.
Even when you enter the income-deriving phase, you will require a substantial allocation to equity because that is the only way to earn inflation-adjusted income. Further, this equity allocation will ensure the growth of capital to support higher income from your investments.