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Where to invest retirement corpus to get monthly income

My friends father retired this month, they want to invest 3,00,000 rupees to get monthly income. Kindly suggest how to plan it. I want to know small cap funds for at least 5 years, as SIP of 5000, provided the fund should be from ethical (shariah complaint)?

Oct 25, 2016 by Imran Ansari, Dhule  |   Retirement Planning

We are assuming that your first and second questions are not connected. Since your father’s friend is retired, he should ensure that the risk profile of his investment is fairly conservative, or in other words, the risk of capital loss should be low. Debt is the appropriate asset class for conservative investors. However, you mentioned that your father’s friend retired very recently. Therefore, he and his spouse, will have a long retired life and will need to worry about the effect of inflation in the long run. Equity as an asset class has a track record of beating inflation in the long term. Therefore, financial planners advise senior citizens to have some exposure to equity also. Hybrid debt oriented mutual funds are good investment options for senior citizens, since the debt component of these funds provide a degree of safety and stability of regular returns to meet the investors cash flow needs, while the equity component can help the investors get capital appreciation and beat inflation in the long term. You can look up top performing debt funds, by using our tool, Top Performing Mutual Funds - Hybrid Debt Oriented Funds.

With regards to your second question, unfortunately, the universe of Shariah compliant diversified equity mutual funds in India is very limited. There are only 2 Shariah compliant mutual fund schemes in India, Tata Ethical Fund and Taurus Ethical Fund. Alternatively you can consider investing in thematic funds, which invest in sectors considered halal (e.g pharmaceuticals, technology etc). Please note that, these thematic mutual fund schemes do not claim to be Shariah compliant in their scheme information documents. Therefore, you need to read their scheme information document carefully and determine if investment mandates of these funds is halal as per Shariah laws. You can look up top performing pharma or technology funds by using our tool, Top Performing Mutual Funds - Equity Funds Pharma and Top Performing Mutual Funds - Equity Funds Technology. If you have any doubt regarding compliance of these funds with religious laws, you should consult with Islamic Finance experts.

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