Investment in Mutual Funds by a Retiree

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subrosx asked 10 years ago

With SCSS rates going low wish to invest in mutual funds. I am a retired person looking for regular income. icici pru person advised me to invest in Balanced advantage fund which gives 0.75% every month plus capital appreciation. I wish to invest about rs 10 laks. but I find icici balanced fund, icici pru MIP25, icici regular income giving better CAGR viz 15.15, 10.41, 14.85 respectively compared to balanced adv fund CAGR of 11.48. please advise where to invest. I also wish to take term deposit at IDFC which gives 8.75 % for seniors. Is it ok. thanks

5 Answers

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Sreekanth Staff answered 10 years ago

Hi, ICICI's Balanced advantage fund is an Equity hybrid oriented fund. The returns are not guaranteed. How sure is your advisor that this fund pays 0.75% every month? Can you please request him to share any links confirming this? Are you planning to invest the Rs 10 Lakh corpus in fixed income generating options? (or) you would like to get capital appreciation only? Are you dependent on the income generated by these investments?

subrosx replied 10 years ago

thanks for the reply. I am looking for regular income but if there is capital appreciation also it is even better. the person from ICICI bank who came showed me a laminated brochure which said 0.75 % of investment would be given monthly. if you see ICICI website it only mentions moneyback but no percentage but also caution that it is not guaranteed. what is your advise? is it better for seniors like me to go for funds like income opportunities fund of icicipru which has major debt component and I can do monthly SWP..to answer your last question, I am certainly dependent on the income for daily expenses. I will be thankful for your advise.

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Sreekanth Staff answered 10 years ago

Hi, As per the dividend payout history of ICICI Balanced advantage fund, it has given roughly (avg) 0.3 to 0.8% as dividend payout. But these are equity oriented funds and the quantum of dividend is not guaranteed. Also, it is not necessary that dividend is declared periodically. So, if you are dependent on this income, suggest you to not to invest in this fund. You may consider combination of Sr.C.S.S + MIP fund (Conservative fund with dividend payout option) with SWP option. Kindly read: http://www.relakhs.com/list-of-best-investment-options-schemes-in-india/ http://www.relakhs.com/best-monthly-income-plans-india-mutual-funds/

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subrosx answered 10 years ago

hi srikant thanks for the reply. I thought dividend payout option involves fund paying out tax almost 28%. should I not do SWP on growth option? I know I am liable for capital gains tax due to SWP but I have 80cc deduction due to SCSS and can take care of the tax angle. what is your opinion?

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Sreekanth Staff answered 10 years ago

Hi, Yes, SWP option on Growth plan is more tax efficient one (if you are in higher tax slab brackets).

subrosx replied 10 years ago

I visited the icicipru office at jayanagar 5th block and they confirmed that on balanced advantage fund they pay money back at 0.75% per month which means they are confident by and large of achieving earnings greater than 9% per annum

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Sreekanth Staff answered 10 years ago

Hi, As per the past track record, they are able to pay the dividends as per your expectations. But let me reiterate that these are not guaranteed and may or may not be repeated in the future.