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My parents want to withdraw 30 lakhs from bank FD and invest in Mutual Funds to receive monthly returns

Thanks to your SIP, SWP & STP tools in MFs. My father was retired employee and just completed 70 years & mother is house wife 65 years. So far he invested his retirement benefits in Bank FDs only. With advise now he is investing through SIP 13,000 per month in ICICI Prudential Long Term Equity Fund (Tax saving) Dividend to get 80C tax benefit & also invested 200,000 in ICICI Prudential Balanced Advantage Fund Growth in Aug 2016 and planned SWP 9% return after one year. After shown your website & tools he wants to invest around 30 Lakhs duly withdrawing from FDs further. Please suggest any MIP, SWP, Dividend funds like (L&T prudence fund) or STP etc. to suit his needs i.e., monthly or quarterly tax free returns?

Sep 8, 2016 by G V Ramaprasad,   |   Mutual Fund

1. Your father’s investment in ICICI Prudential Long Term Equity fund for savings tax is perfectly fine. He has chosen dividend option which is good for him as he can enjoy the tax free dividends while holding this ELSS investment for a long period of time.

2. Selection of ICICI Prudential Balanced Advantage Fund for SWP is another good choice and planning to withdraw 9% after one year through SWP is again a good decision.

3. It is heartening to note that he wants to withdraw money from bank fixed deposits and invest around 30 Lakhs in mutual funds. Considering his age, he can invest in balanced funds, but remember, he should have an investment horizon of 5 years or so for investing in balanced funds. You can choose couple of good balanced funds from here and invest in them - Check returns of Top performing balanced funds.

You may also like to read our review of top balanced funds to invest in 2016 - https://www.advisorkhoj.com/best-mutual-funds...

4. Now, how to get regular returns from his investment in balanced funds? He has two options 1) Opt for monthly or quarterly dividend payout options – You can check this tool to know the dividend payment track record of balanced funds https://www.advisorkhoj.com/mutual-funds...

You may note that ICICI Prudential Balanced Fund, ICICI Prudential Balanced Advantage Fund, SBI Balanced fund, HDFC Balanced Fund, HDFC Prudence Fund, DSP BlackRock Balanced fund, Birla Sun Life Balanced 95 Fund and TATA Balanced Fund has good and consistent dividend paying track record along with track record of good performance.

The other option is 2) to withdraw through SWP mode. He can start SWP withdrawal after 1 year of investment in order to get the tax free return (long term capital gain is tax free). However, if he wants to withdraw money immediately after investing then he should invest a part of 30 Lakhs in liquid funds and start withdrawing a fixed amount monthly immediately after investment (but not exceeding @ 7% rate annual). The quantum of liquid fund investment should be equivalent to the amount of 12 months of SWP withdrawal.

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