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Where should a retiree invest Rs 30 lakh?

Read on to understand how a retiree should go about investing a surplus

Where should a retiree invest Rs 30 lakh?

I am 63 years old with an investible surplus of Rs 30 lakh in mutual funds. Suggest me the plan. - Lakshmanan TR

Retirees can receive a huge corpus at their retirement or it can be from numerous other sources. Needless to say, they have little scope to go wrong and want to invest it in the best possible way. And to invest your money in the best possible way, it is important to first decide what you are looking for and what your expectation from the investment is. Are you looking for a steady stream of income for your living expenses? Or are you just seeking growth and want to invest the money for the long term? It could be probably to derive occasional supplementary income or leave behind a legacy for your loved ones or to have some extra money.

If your main objective of investing is to derive regular income and, assuming, that the corpus is all that you have and no other sources of income, then you must split your corpus into two parts. Around 30 to 40 per cent of the amount should be invested in equities and the rest in fixed income. Investing in equities will provide growth and ensure inflation-adjusted income during the later years of your retirement, while fixed income provides a stable regular income for monthly expenditures.

When looking to invest in fixed income avenues, your first priority should be government-backed investments such as Senior Citizen Savings Scheme (SCSS) or Pradhan Mantri Vaya Vandana Yojana (PMVVY). As far as interest rates for these two schemes go, they both provide a decent return of 7.40 per cent per annum. You should also keep aside some amount for any contingency; either in a bank, in the form of a fixed deposit (FD) or a high-quality debt fund. For the equity portion, you can choose any conservatively managed fund. However, do not invest all the money at one go. Spread it over the next 18-24 months. To understand more, check out the ultimate portfolio for a retiree.

Now, looking at another scenario where you're looking for long-term growth. In that case, you can increase your equity allocation to 50 to 70 per cent and the rest can be allocated to fixed income. For this, you can also look at investing in a hybrid fund. They are a convenient option to get your portfolio automatically re-balanced in a tax-efficient way.

Ultimately, it depends on what you plan to do. If you have no means of income, working out and investing in debt for some stable income helps. But if you have other means of income like a pension or rental income and your goal is to increase your wealth, then you can always allocate more on equity.

Alternatively, you can also check out Value Research Portfolio Planner, which gives you a ready-made list of funds based on your investing goal, investment capacity, time horizon etc.

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