CA Kanan Bahl

CA Kanan Bahl

21-11-2022

12:11

FDs provide too low returns πŸ”» Residential Properties fetch just 2% rental yield 🏑 Then what to do to fetch good regular income?πŸ€” Systematic Withdrawal Plan (SWP). Read on to know about itπŸ‘‡

1/ What is SWP? SWP - Systematic Withdrawal Plan It means you invest money in Mutual Funds, and keep on withdrawing for your needs (auto mode) Please read the entire thread. Half knowledge would be counter-productive

2/ How to plan SWP? Say you have β‚Ή1.5 Cr in retirement fund 50% allocation each in FDs and Balance Advantage Mutual Funds (BAMF) Now your yearly income would be: A. FDs= β‚Ή1.5Cr*50%*6.5% = β‚Ή4,87,500 B. BAMF= β‚Ή1.5Cr*50%*10% = β‚Ή7,50,000 Total β‚Ή12,37,500 or ~β‚Ή1,03,000 p.m

3/ Next course of action? You can withdraw 100% from FD income And withdraw the balance of MF units for other expenses This way half your capital is very safe in FDs Rest half is partially in equity (volatile) and partially in debt (safe)

4/ Why SWP at all? Say, you have monthly expenses of β‚Ή70,000 and β‚Ή1.5 Cr to invest Flats won't fetch you that FDs will initially, but interest rates generally decrease and inflation increase your expenses BAMFs offer you higher capital appreciation with lesser volatility

5/ Is it recommended? Retirement Planning is supposed to be stress and volatility-free However, many can't gather as much corpus to rely on Fixed Income securities Even if they can initially afford expenses with FD int., Inflation increases expenses & interest decreases

6/ What will I do for retirement? A. Buy prime commercial Real Estate and B. Put balance money in FDs Keep only such money which in equities (at age of 65+) which I won't need in my lifetime and want to build for my heirs SWP is not bad, but volatility should be avoided

7/ Any other important point? Please also note that equities are subject to volatility. Say, you retire today and recession bells start ringing a month later. Markets might go down and you might be selling your BAMF units at loss Markets can even take even 3-6 yrs to recover

Disclaimer: Doing this on your own without expert advice would be like attempting stunts like Jackie Chan Please for god's sake don't do this on your own. Get a SEBI Registered Investment Adviser on board to help you with his. I have just shared this for educational purposes.

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