How can a retired person set up an SWP in mutual funds?

I am a retired person. I get monthly income from my bank deposits. They shall mature in September 2017. I am planning to transfer the entire Rs 30 lakh to mutual funds and go for an SWP of Rs 25,000 per month. Please suggest the appropriate mutual fund scheme for me.
--Ramachandra Rao

Vishal Ramaswamy, a mutual fund advisor, responds:


Debt investing (low risk):
Invest the lumpsum of Rs 30 lakh in SBI Magnum Gilt Fund – Long Term Plan – Growth. Set up the SWP for Rs 25,000. You can divide it into three funds of Rs 10 lakh each, however setting up the SWP for each of them shall be cumbersome.
Hence, I suggest you to go for a single fund. Based on the performance of last five years, SBI Magnum Gilt Fund has delivered above 10 per cent (your SWP) annualized returns. Keep a close eye on the annual returns, if they fall below 10 per cent, you will have to pick another fund that delivers same returns at similar risk.

Equity investing (higher risk):
Invest Rs 9 lakh in the SBI Magnum Gilt Fund – Long Term Plan for three years or more (till funds last). Set up the SWP of Rs 25,000 as desired.

Set up an STP of Rs 7 lakh each in:

1. Reliance Gilt Securities Fund to Reliance Small Cap Fund (an STP of Rs 19,500)
2. Birla Sun Life Gilt Plus PF Plan to Birla Sun Life Frontline Equity Fund (an STP of Rs 19,500)
3. ICICI Prudential Long Term Gilt Fund to ICICI Prudential Dynamic Plan (an STP of Rs 19,500)

Once the amount from the SBI Magnum Gilt Fund – Long Term Plan has been used up, redeem another Rs 1 lakh each year from all the equity funds and move it to the SBI Magnum Gilt Fund – LTP and setup the SWP till the fund is exhausted.
By doing so, you will have more time for the equity funds to do better. You will be able to prolong the duration of your original lumpsum.

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