Is it risky to invest ₹3 crore in MFs after your retirement?

—Sankarshan Ahuja

First, use the low-risk, government-backed options available—the Senior Citizens Savings Scheme, the Pradhan Mantri Vaya Vandana Yojana and the Reserve Bank of India’s floating rate bonds. These are better than Fixed Deposits (FDs) in terms of interest rates. They are also long term investment instruments. Though you do not need monthly income from investments, these will help you earn better returns on post-retirement amount with less risk.

For the remaining amount, you can definitely 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 a small amount in funds holding mid-cap or small-cap stocks), but only if you need this money for at least seven years And you are ready to take any fall in it. Return in your stride.

Debt funds are generally less risky, except for funds that try to time periods where interest rate cycles happen 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 keep a part of your investments in these funds. If you are in a higher tax bracket even after retirement, then after crossing three years, these are more tax-efficient than FDs. You can mix both long-term and short-term debt funds in your portfolio.

Since your investment amount is large, enlist the help of an investment advisor or a financial planner to meet your expenses and income needs, and build a portfolio with the right mix of funds to suit your needs.

Shrikant Meenakshi is the co-founder of PrimeInvestor.in.

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