Retired and scared of mutual funds? Expert suggests how to invest Rs 1 crore without taking excessive risk

Many retirees struggle with a common dilemma after receiving a retirement corpus: where should they invest their money? While fixed deposits offer safety, they may not generate returns that beat inflation over the long term. On the other hand, investing a large sum in equity markets can feel risky, especially for those who are no longer earning a regular income. Striking the right balance between growth, stability, and peace of mind becomes crucial during retirement.

One such query came from Vimal Mehta, a retired investor from Vadodara and viewer of The Money Show on ET Now, who is scared of investing in mutual funds and is now retired. He is looking to invest Rs 1 crore for almost five years and that is a lumpsum investment that he is looking at.

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Expert Abhijit Chokshi, Founder, Stockifi.in shared his views on how retirees can approach mutual fund investing without taking excessive risk.

According to Chokshi, this fear is quite common among retirees. "Yes, absolutely, it is a very common query where, especially in the stage of retirement people are scared of investing in direct equity," Chokshi said.

He observed that many investors tend to gravitate towards two extremes after retirement. Some prefer to keep all their money in fixed deposits, while others may put a significant portion into equities.

According to him, both approaches carry risks. "If you put everything in FD, then there is a chance of losing out due to inflation. While at the stage of retirement, putting everything in equity would lead to maybe panic during corrections," he said.

Based on the limited information available about the investor, Chokshi suggested maintaining an investment horizon of at least five to seven years if mutual funds are being considered.

He also stressed the importance of setting aside money for emergencies before making any investment decisions. "That is the mistake a lot of people make. They do not have any allocation for emergency. So, when something out of the box strikes, they are left stranded," he said.

Allocation for a Rs 1 crore corpus

Chokshi recommended a diversified allocation rather than putting the entire amount into one category or one basket.

According to him, around Rs 40-50 lakh can be invested in a balanced advantage fund, while about Rs 30 lakh can be allocated to a high-quality debt fund to serve as an emergency corpus and provide stability.

For equity exposure, he suggested starting with Rs 10-15 lakh in a quality Nifty 50 index fund or a large-cap fund. This approach, according to him, can help retirees participate in market growth while keeping overall portfolio risk under control.

When asked whether a lump sum investment would be appropriate, Chokshi advised caution. Instead of investing the entire Rs 1 crore immediately, he suggested using a Systematic Transfer Plan (STP).

Under an STP, investors first park their money in a relatively low-risk option such as a liquid fund and gradually transfer fixed amounts into equity-oriented mutual funds over time. "STP can be a good hack to do this," Chokshi said.

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He added that this strategy can help reduce the risk of entering the market at an unfavourable time and may offer greater comfort to investors who are nervous about market volatility.

Explaining the process further, Chokshi said retirees can initially park their funds in liquid mutual funds or Liquid BeES and then gradually transfer money into equity funds every month through an STP.

For the equity allocation, he suggested maintaining a core holding in a flexi-cap fund. "Generally, flexicap funds have a higher largecap proportion," he said.

Among specific fund categories, he suggested considering a flexi-cap fund for the core portfolio and allocating a portion of the equity exposure to a mid-cap fund for additional growth potential.

“Generally, flexicap funds have a higher largecap proportion. So, my suggestion would be Abakkus Flexicap which is a recently launched fund. He can do that and then 30% of the amount he can take some risk, like a Nippon Midcap he can invest some parts in it,” the expert said.

According to Chokshi, retirement investing should not be driven solely by return expectations. Investors must also ensure that their portfolio helps them stay calm during market fluctuations. He recommended maintaining a long-term perspective of seven to ten years even after retirement and following a balanced asset allocation strategy.

According to him, such an approach can provide retirees with both growth potential and the peace of mind they seek while managing their retirement corpus.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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