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Since you are going to retire soon,I will not suggest equity schemes for you. You can consider investing your money in the following options

Written by Adhil Shetty | Published: June 17, 2013 4:58 am

I am working with the government of NCT,Delhi and will retire in August,2013. I am expected to get approximately Rs 30 lakh on my retirement. I fail to understand,how I should invest this money so that I will get some monthly amount or a lump sum amount on future investment. I will also be getting pension from the government. 

— Wadhwa 

Since you are going to retire soon,I will not suggest equity schemes for you. You can consider investing your money in the following options:

Monthly Income Plan (MIP). These are schemes by mutual fund companies. MIPs are essentially debt mutual funds. These funds are low risk. They provide annual returns of 8% to 11%. You can choose the frequency of dividends paid by the fund. There are many options available such as monthly,quarterly,half-yearly or even yearly. For every lakh you put in MIPs,you may expect to get about Rs 600 – 800 every month. However,paying dividend is not binding on mutual funds. The funds may not pay the dividend if they do not have means to pay.

Post Office Monthly Income Scheme. This plan is by post office. You get monthly income from post office on your deposit. You can deposit maximum of Rs 4.5 lakh for one person and Rs 9 lakh for two people. This means you can open an account for post office scheme for you and for your spouse for a maximum of Rs 9 lakh The return is 8.4% per annum. This means you can receive about Rs 3,375 per month on your investment of Rs 9 lakh.

Bank deposits. Few banks allow you to deposit money and claim interest every month. The rates keep varying and you can expect annual return of 7% to 9.5% depending on the prevailing interest rate.

For my daugther’s education and my retirement,I have added two LIC policies one for each. Is it safe to assume that they would fetch me at a minimum 5-6% return over a period of 15-20 years. Is that a good option to keep?

— Vishal

LIC will certainly give you a return of 4% to 6%. However,you have better options than LIC policies. If you have 15-20 years investment horizon,I would suggest you can invest a part of money in a balanced fund and a part in equity fund. Equity funds are those that invest in equity market. They are high risk investment but also provide high returns. Over a time horizon of 15-20 years,equity funds perform extremely well giving you a return of 12% to 18% CAGR. In the short term,you will experience lot of fluctuations though.

The other fund is debt fund that invest in debt like bank savings,government securities,corporate bonds,etc. There will be lower risk than the equity mutual funds but the prospect of returns is also low. Debt funds provide a return of 7% to 10%. By dividing your money in both funds,you can achieve a return of 9% to 12% over your investment horizon.

Here is what you should do. If you can invest Rs 10,000 per month,split it into two parts,Rs 3,000 and Rs 7,000. Invest Rs 3,000 per month in any equity fund,and Rs 7,000 in debt funds.

— Expert advice by Adhil Shetty,CEO,BankBazaar.com

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