Which funds are suitable for a systematic withdrawal plan?
I have built a good corpus through a mix of equity and hybrid funds. I am nearing retirement and would be seeking regular cash flows through my investments. Which funds are suitable for a systematic withdrawal plan (SWP)? —Name withheld on request To meet regular cash flow requirements, a SWP can be quite useful.
But the funds that are suitable for this depends on the individual’s risk appetite and liquidity needs. Usually, it is better to go with low-risk funds to ensure capital protection. One can either go for a plain vanilla debt fund such as ultra-short-term funds, which are less sensitive to interest rate movements, compared to longer duration funds.
The other option is conservative hybrid funds. Balanced advantage funds (BAFs) can be avoided as these can be a lot more aggressive in terms of their equity investments; can go up to 90% equity exposure during market correction. A conservative hybrid fund (allocation mix: 10-25% equity, 75-90% debt) can be considered as one of the withdrawal buckets for SWP.
This can be complemented with ultra short-term fund for immediate expenses (up to two years) and the rest of the corpus can be parked in a conservative hybrid fund. Every two years, the funds can be rotated from conservative hybrid to ultra short-term, which will allow more time for corpus in conservative hybrid to appreciate and also keep immediate expenses in low-risk fund. This is also known as bucket strategy.
I have a systematic investment plan (SIP) across a wide range of mutual fund categories —a couple of bluechip funds, a hybrid fund, three large cap funds, etc. I also want to invest in gold. Is this good to build a well-diversified investment portfolio ? —Name withheld on request You can continue your
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