My father is 68 and has a corpus of about Rs 3 crore. Where and how should he invest to generate a monthly income of about Rs 1.5 lakh?
Rs 1.5 lakh every month means Rs 18 lakh a year, which is a six per cent return on his investment. There are two ways of approaching it. One is building a conservative portfolio, maybe 60-70 per cent into fixed income and remaining in equity and doing a systematic withdrawal plan from there. This portfolio can have two-three equity funds and three-four debt funds, which are not very risky.
The other approach is to keep three years' income, i.e., Rs 54 lakh in your case, in a fixed income fund. Do a systematic withdrawal plan of Rs 1.5 lakh every month so that he does not have to worry about the income. Remaining money can be allocated as two-third into equity and one-third into fixed income. This will give him an assurance about the next three years' income. In between, when the market does well and he is able to generate superior return as compared to inflation, he should take some money out, maybe annual withdrawal from his main portfolio to supplement his income portfolio. So this way, within a year-and-a-half or so, he should be able to move another year's income requirement into his fixed income fund. This would ensure a worry-free retirement and he would not have to bother about his monthly income requirement. A good part of his money will keep growing and beat inflation and protect the worth of the capital.