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Where should I invest the debt portion of my retirement fund?

Corporate bond and banking and PSU funds can be good alternatives, says Dhirendra Kumar

What would be the best way for one to invest the debt portion of one's retirement fund after catering to FD and SCSS? Would it be good to invest some amount in a corporate bond fund and a banking and PSU debt fund? Also, with the applicability of stamp duty, should one do anything about an ongoing STP from a liquid fund to equity funds?
- Ganesh Sivaprasad

I would say that once you are done with your Senior Citizen Saving Scheme (SCSS) and fixed deposits which would be enough for you to make a living on a month-to-month basis for your regular income requirement, then it entirely depends on your outlook on the chosen debt category. The banking and PSU debt category is a relatively good avenue but then, you need to take a long-term view. This is because while it's expected that this category is unlikely to be hit by unusual credit events, these funds can also go up and down in value. Besides, corporate bond funds with top ratings in the underlying could also be a good alternative.

At the same time, I would say that for your long-term money, consider having some equity allocation. This is because if you consume all your income from your fixed-income investments, then you need something which can supplement your need for a higher income in the future.
For example, you are able to generate Rs 50,000 as income from your fixed-income investments today. Five years later, Rs 50,000 will not be enough and you may need about Rs 65000-70000, then you will need a higher capital. This higher capital can come only if you have a part of your money invested in equity and it's appreciating. Having some portion in equity is important because that is the only thing that can help you provide protection against inflation.

Coming to your second question, the stamp duty that has been levied from July 1 is 0.005 per cent. This means that on your Rs 1 lakh investment, it will be Rs 5. So, it is not significant but of course, it is undesirable and there is no way to avoid it. Hence, ignore it for now and I don't think any of your investment decisions should be guided by the stamp duty that has been levied, as you can't do anything about it. Even if you run a large company and you have been investing in a liquid fund, you may dislike it and it may reduce your return. However, you don't have any choice. So, better not to worry about it and bear with it.

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