How to deal with falling returns in retirement

Mr Gupta has recently retired and has already made significant investments in governmentbacked guaranteed return schemes, including Senior Citizen Savings Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY). He still has about Rs 30 lakh to invest but is not sure about where to invest the amount. At present, he is contemplating investing in credit-risk funds, as other categories of debt funds have been giving quite low returns lately. He is also lured by certain debentures, giving returns in the range of 8-9 per cent and wants to know whether he should invest in them. Subdued returns of short-duration funds Returns from short-duration funds and other fixed-income categories, barring credit-risk funds, have fallen lately. The short-duration category was hit hard in the aftermath of the IL&FS crisis and is currently playing it safe, with most of the funds avoiding credit calls and investing in top-rated assets. Given the risk aversion that we have been seeing since the pandemic began, funds under the category have shifted to quality papers. So, these funds have raised their sovereign exposure, while their exposure to lower-rated papers has been comparatively muted. Besides the category's shift to a low-risk strategy, the recent rate-hike by RBI has also impacted its returns. And more rate-hikes are expected in the near future. Credit-risk funds are, well, risky While these funds faced redemption pr

This article was originally published on September 03, 2021.