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Business News/ Mutual Funds / Is it risky to invest 3 cr in MFs after your retirement?
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Is it risky to invest ₹3 cr in MFs after your retirement?

First, utilize the low-risk, government-backed options available—the Senior Citizens Savings Scheme, Pradhan Mantri Vaya Vandana Yojana and Reserve Bank of India’s floating rate bonds

Debt funds are generally low risk, except for funds that try to time where the interest rate cycle is and funds that go for debt papers from issuers with poor credit ratings.Premium
Debt funds are generally low risk, except for funds that try to time where the interest rate cycle is and funds that go for debt papers from issuers with poor credit ratings.

I am due for retirement next year and may get around 3 crore from my employer. I am exploring options to invest this money efficiently as I will also be eligible for pension, which will be enough for my regular expenses. Can I invest in mutual funds at this age or is it too risky?

—Sankarshan Ahuja

First, utilize the low-risk, government-backed options available—the Senior Citizens Savings Scheme, Pradhan Mantri Vaya Vandana Yojana and Reserve Bank of India’s floating rate bonds. These are superior to fixed deposits (FDs) in terms of interest rates. They are also long-term investment instruments. Though you don’t need monthly income from investments, these will help you earn better returns on your post-retirement corpus at low risk.

For the remaining amount, you can certainly consider mutual funds. The risk in mutual funds depends on where the money is invested. Equity funds are high-risk, with mid-cap and small-cap funds ranking higher on risk than large-cap-based funds.

You can invest in large-cap equity funds (and even small amounts in funds which hold mid-cap or small-cap stocks) , but only if you will not require this money for at least seven years and are willing to take any fall in the returns in your stride.

Debt funds are generally low risk, except for funds that try to time where the interest rate cycle is and funds that go for debt papers from issuers with poor credit ratings.

As long as you stick to stable and high-quality debt funds, you can hold a part of your investments in these funds. They are also more tax-efficient than FDs once you cross three years, in case you are in the higher tax brackets even post retirement. You can mix both long-term and short-term debt funds in your portfolio.

Since your investment amount is large, take the help of an investment adviser or a financial planner to map out your expenses and income needs, and build a portfolio with the right mix of funds that fit your requirements.

Srikanth Meenakshi is co-founder, PrimeInvestor.in.

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Published: 13 Jul 2022, 10:57 PM IST
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