Photo: iStock
Photo: iStock

Invest 60% in equity, 40% in debt for 7 years time frame

Aditya Birla Sunlife Frontline Equity fund, Mirae Asset Emerging Bluechip fund and Franklin India Equity fund would make good equity fund choices

I am 44 and want to save for my retirement and child’s education and may need funds in 7-8 years. I can save 30,000 per month and have savings of 10 lakh in various mutual funds. Please suggest two funds for my goals. 

—Kshitij G.

I am assuming that the education goal is what you will be needing money for in 7-8 years and your retirement will probably be in another 10-12 years. If that’s the case, depending on how much you forecast as being needed for your child’s education, you can apportion an appropriately higher proportion of your savings towards that goal and a smaller amount for retirement. Say you would need 30 lakh for your child’s education (after factoring in inflation), you would need to save and invest 20,000 a month for this purpose and you can invest the remaining 10,000 for your retirement. You can keep the 10 lakh as a reserve fund to be utilised to meet any short fall or to add to your retirement corpus in future. In terms of investment choices, please go with a moderate portfolio of 60% equity funds and 40% debt funds for your education portfolio. Aditya Birla Sunlife Frontline Equity fund, Mirae Asset Emerging Bluechip fund and Franklin India Equity fund would make good equity fund choices, while short-term debt funds from UTI and HDFC fund houses can make for good debt fund choices. For retirement, use the same funds, but increase the allocation to equity to 80% with debt funds getting 20%.

How much money can I get from a systematic withdrawal plan (SWP) of 1 lakh if I withdraw 1,000 per month? 

—Joy Mukherjee

To estimate how much money you would be able to withdraw, one needs to assume at what rate your money will grow. For example, if we assume that your investment will grow at an annual rate of 10%, it means you are seeking to withdraw about 12% of your invested money every year; so your capital would keep diminishing with time as you withdraw more. You will be able to withdraw for 15 years and be able to draw down a total of about 1.9 lakh in this period.

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Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com.

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