I’ve steered investing in mutual funds to my son for constructing his retirement corpus. He can comfortably make investments no less than ₹20,000 per 30 days in mutual funds. Also, please counsel whether or not he ought to put money into debt funds for the aim.
– Name withheld on request
(Query answered by Naveen Kukreja – CEO& Co-founder, Paisabazaar.com)
Equities as an asset class outperform each inflation in addition to fastened revenue devices by a large margin over the long run. So, I might suggest your son to put money into fairness mutual funds, and never in debt funds, for constructing his retirement corpus. He can distribute his month-to-month investible surplus equally by means of SIPs in direct plans of: HDFC Index Sensex Fund; Mirae Asset Large Cap Fund or Axis Bluechip; Axis Midcap Fund or PGIM India Midcap Opportunities Fund; and Parag Parikh Flexi Cap Fund or PGIM India Flexi Cap Fund. If he has the scope of saving taxes beneath Section 80C, then he can put money into direct plans of Axis Long Term Equity Fund and/or Mirae Asset Tax Saver Fund by means of SIP.
As equities might be risky within the brief time period, he can put money into fastened revenue devices like debt funds or fastened deposits to fulfill his brief time period monetary targets or park his emergency fund. Given the continuing rising rate of interest regime, I counsel that he put money into financial institution FDs providing rates of interest of 6% p.a. and above. Some of the scheduled banks providing such rates of interest embody SBM Bank, Jana Bank, Suryoday Bank, Utkarsh Bank, Ujjivan Bank and ESAF Bank. He ought to have FD tenures of 1-2 years, with out an auto-renewal possibility, because the might get the chance to resume his FDs at larger rates of interest.
In case, rates of interest after FD maturity attain under 6% p.a., he can put money into direct plans of short-duration debt funds of HDFC Short Term Fund and ICICI Prudential Short Term Fund, for constructing his fastened revenue corpus.
In case your son has a better danger urge for food, he can make investments part of his fastened revenue corpus within the direct plans of conservative hybrid funds like Kotak Debt Hybrid Fund and ICICI Prudential Regular Savings Fund. As these funds have to speculate 10-25% of their corpus in equities and equity-related devices, they will probably generate larger returns than debt funds and stuck deposits.
(Sending queries and views at [email protected])
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