Mar 26, 2012, 01.37 PM | Source: CNBC-TV18

Use systematic transfer plan for retirement monthly income

Radhika Gupta (Director, Forefront Capital Management) advises investors to avoid investing lump sums in one fund, but use the systematic transfer plans since the markets are very volatile.

Midcap Radar

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show »

Radhika Gupta (Director, Forefront Capital Management) advises investors to avoid investing lump sums in one fund, but use the systematic transfer plans like HDFC MIP or Birla Sun Life Monthly Income Plan since the markets are very volatile. She recommends investing in a large-cap equity product like ICICI Pru Dynamic, the Franklin India Bluechip Fund and the DSP Equity Fund.

Below is the edited transcript. Also watch the accompanying video.

Q: Investor is planning to invest an amount of Rs 15 lakh. Since it is his retirement account for his father he perhaps would like some amount of a monthly income. What is the advice that you would give him?

A: As you said its a retirement account, so we are looking at a monthly income plan. I would invest between 70-80% in debt instruments and the balance in equity instruments so you would earn debt return with an equity kicker. In the long-term a good monthly income plan has delivered somewhere between 10-11% a month which is right up there just beating inflation with a lot of safety. What I would do is invest the amount in a monthly income plan but not do it in a lump sum. I would do it using a systematic transfer plan over three months so that the money is invested in 12 tranches, one every week over three months. That will make sure you smooth out any volatility in the markets because the markets have been very volatile. Its obviously a large amount. So invest it carefully using a systematic transfer plan. The fund we would recommend is the HDFC MIP or the Birla Sun Life Monthly Income Plan.

Q: Investor can invest Rs 6,000 per month. He has insurance. What is the best way to invest?

A: It seems he doesnt have much by way of other equity investments so I think he can invest in a large cap equity product and be fairly aggressive. I would do the SIP into two funds. He can choose ICICI Pru Dynamic that shifts between various midcap, large cap and small cap instruments and also has a market timing component and then also the Franklin Bluechip Fund. The DSP Equity Fund is also a good fund. So between three funds he can pick two funds, not more than two funds and do this SIP. If he continues doing it in a systematic way he should be able to earn about Rs 35-40 lakh over a 15 year period by doing these consistent SIPs.

Q UTI was the only mutual fund for the period of:


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