personal finance

Which mutual fund schemes are suitable for a pensioner to invest in?


I am a 60-year-old pensioner and I want to invest in mutual funds. How can I invest online? Also, please suggest the kind of schemes I should invest in.

Jayant R. Pai CFP and Head of Marketing, PPFAS Mutual FUND replies, “If you are new to mutual fund investing, you will have to undertake a process known as Know You Client (KYC). This one-time exercise can be carried out with any fund house and is valid for investing across mutual funds. Once you get the KYC done, you can start to invest in mutual funds which are broadly classified under two categories—equity and debt. It is advisable that you start with a simple liquid debt fund, and then move on to equity schemes. Though the two are different, the liquid scheme will give you a sense of how NAVs move, how to decipher an account statement, etc., without having to be excessively worried about stock market fluctuations. There are chances you may commit errors, if you explore this space all on your own. So, it is advisable that you take the services of a professional.”

My father, 51, has invest
ed Rs 10 lakh in an FD that is about to mature. He wants to invest this sum in mutual funds, which can earn him quarterly or monthly dividends, for 5-7 years. Please suggest where to invest.

Prableen Bajpai Founder, Managing Partner, FinFix Research & Analytics replies, “It is best that he opts for the growth option when investing in mutual funds as a dividend distribution tax of 11.65% and 29.12% (including surcharge and cess) is levied on equity and debt funds, respectively. This tax substantially reduces the in-hand return for investors. Also, given the nature of mutual funds, they don’t offer pre-defined dividend payout schedules. So, your father must not rely on regular dividends to supplement his income— assuming he is working. He can, however, park this sum in a debt fund—return likely to be 7-8%—and opt for a systematic withdrawal plan (SWP), based on his requirement. If he doesn’t need a supplementary income, then going by the rule of thumb, he should invest the sum equally between equity and debt. Within equity, he should opt for a large-cap fund and invest via systematic transfer plan over the next couple of months. Within debt, he can pick a quality accrual fund and invest Rs 5 lakh as a lump sum. Compared to FD, a debt fund is tax-friendly and can give him competitive returns.”





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