Mutual fund queries answered by Amol Joshi, Founder, Plan Rupee

I retired recently from my job and I have some retirement corpus I want to invest. I do not need a regular return as my wife is also working. The Bank FD returns are very low. Please advise me some debt mutual funds or any other fixed-income scheme for a period of five years. I am in 20 per cent tax bracket.

— V GOPALAN

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) provides an assured pension based on a guaranteed rate of return of 8 per cent per annum for 10 years. Interest of 8 per cent makes it attractive compared to FDs. However, in your case it may have two draw-backs: first, you do not need regular income, but PMVVY gives regular pension, so you will lose out on the compounding benefit; and secondly, return of 8 per cent will actually reduce to 6.4 per cent in your hands due to 20 per cent tax bracket. Since your investment horizon is of five years, debt funds will solve both these problems. You can choose growth plan for cumulative or compounding benefit and post three years holding period, you will get benefit of indexation, which will reduce your tax outgo. At this point, you may go for short-term debt funds. You may consider Franklin India Low Duration Fund or HDFC Short Term Debt Fund.



I am investing monthly Rs 1,500 in Axis Focus 25 Scheme and Rs 2,000 in Aditya Birla Sun Life Tax Relief 96 (G) scheme. I am planning to invest in BOI Axa Tax Advantage (G) Fund and Tata India Tax savings (G) fund in order to save taxes. I have an investment horizon of 3-5 years. Is my selection of tax-saving funds good? Also, are investments made in regular funds more expensive than those in direct funds?

— SHREYANSH AGARWAL

Your query is on ELSS funds for tax-saving purpose. In that regard, please note that Axis Focused 25 is not an ELSS scheme. You may choose Motilal Oswal Long Term Equity Fund for tax saving purpose. You may continue with your selection of rest of tax saving schemes. Yes, investments made in regular plans are expensive compared to one in direct plan to the extent of distribution expenses.

I am a 31-year-old NRI and I have been investing Rs 50,000 each per month in SBI Bluechip Fund and SBI Magnum Multicap Fund for the past six months. I want to build a corpus of Rs 5 crore in the next 10 years. I am planning to double the investments from next year in the same funds. Please advise the best strategy for me. As an NRI, I have constraints in opening multiple folios in different AMCs as it requires my physical presence.

— AMANDEEP SINGH

Considering your limitations, you may stay with these selected funds. These are good funds in the large and multicap categories. As per the investment amount shared by you, with doubling effect from next year, and at 12 per cent CAGR, you will accumulate Rs 4 crore in 10 years. To reach Rs 5 crore, the required CAGR is roughly 17 per cent. This is very aggressive return expectation. You may instead increase the proposed Rs 2 lakh from next year to Rs 2.55 lakh, if possible, to reach the goal. Or, after doubling the monthly amount next year, top up the monthly amount by 8 per cent per annum to reach Rs 5 crore.