Need Regular Income

Retirement is a crucial stage in one’s life. The regular cash inflows in terms of salary stops, however, life goes on even after retirement. With an increased average lifespan hovering around 70 years in India, regular income is needed to manage monthly expenses for the rest of their lives. Also, with age, there would be an increase in healthcare expenses. Therefore, having a regular, stable income source is important to sustain a financially independent life.

When considering investment solutions that have the scope to offer regular income, investors need to factor in inflation and capital preservation. The purchasing power of money reduces over time due to inflation. Post-retirement, you need a solution that gives stable returns that outperform the inflation rate and protects your capital.

In fact, this doesn’t just apply to retirement but also when you are looking for a passive income stream.

This brings us to debt funds.

How Debt funds can potentially help you achieve regular income.

If you are already retired and have received a lump sum, you may want to consider investing your retirement corpus in a debt fund. Debt funds are mutual fund schemes investing in fixed income securities such as government bonds, corporate securities, and money market instruments.

As some debt funds tend to invest in less volatile securities, they aim to generate relatively stable returns. Again, open-ended debt funds have no lock-in period. So, in case of need, exiting from a debt fund is relatively simple. Thus, debt funds seek to offer the triple advantage of capital preservation, low volatility, and liquidity.

If you have invested in a conservative retirement fund and have around 3 to 4 years to retire, consider gradually shifting from an equity fund to a debt fund for capital preservation using tools such as systematic transfer plan. Upon retirement, you have the scope to earn regular income from your debt fund investment.

If you have a greater risk appetite, you may also select a hybrid debt fund, where a majority of the investment is made in money market instruments and a small portion is invested in equities. The advantage would be potential regular income from the debt investment and potential for capital growth from the equity investment.

If you have over a decade or more, consider investing in a balanced fund or aggressive retirement fund. Investing through SIP is a convenient way to potentially create a corpus in your income-earning years.

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* Investors should consult their financial advisers if in doubt about whether the product is suitable for them. This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The material is prepared for general communication and should not be treated as research report. The data used in this material is obtained by Axis AMC from the sources which it considers reliable.

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