My 70-year-old mother wants to invest a lump sum of Rs 3 lakh. She wants monthly returns on her investments while keeping her capital intact. Please advise.
Prableen Bajpai Founder, Managing Partner, FinFix Research & Analytics replies: Capital preservation and monthly income can be achieved by investing in a government-backed scheme. The first option is the Pradhan Mantri Vaya Vandana Yojna (PMVVY), which is open till 31 March, 2020. The scheme earns an annual interest of 8%, payable monthly, and thus an investment of Rs 3 lakh will give your mother with a monthly pension of Rs 2,000. The invested amount will remain locked for 10 years. The second option is the Senior Citizen’s Saving Scheme (SCSS), which will earn an interest of 8.6%, paid out quarterly. The tenure of the scheme is five years.
In case these two options have already been availed, you can look at investing in a Post Office Monthly Income Scheme (POMIS) wherein she can earn an interest of 7.6% per annum, payable monthly. The scheme has a tenure of 5 years, although premature withdrawal is possible after paying penalty. The interest rates of SCSS and POMIS are subject to change on a quarterly basis. In case your mother wishes to have the flexibility of accessing her funds anytime, you can park the sum in a liquid fund and set a systematic withdrawal of around Rs 1,500 a month, which will ensure the principal amount doesn’t deplete with time.
I have been investing Rs 2 lakh a month in mutual funds through SIPs for the last 5 years. I have now close to Rs 2 crore across various funds. I am also investing Rs 20,000 per month in liquid funds. We are a family of three living in our own house. As MF investments have shown almost zero appreciation in the last five years, should I gradually shift my corpus to liquid funds to generate better returns?
Vidya Bala Co-founder, Primeinvestor.in replies: It is true that the market rally was very narrow in the last 5 years and very few stocks gained. So your returns may have been in single digits. However, if you did not gain at all, then it may be due to any of these reasons— you are overweight on small and mid-cap funds or the quality of your funds is bad. Instead of entirely exiting equity, asset allocate the portfolio with a healthy dose of liquid and short-term quality debt funds and check whether you are invested in poor quality equity funds and switch.