Alekh Yadav, Head of Investment Products at Sanctum Wealth, addresses key considerations for such investors, particularly those like Rajiv Tandon, a senior citizen aiming for steady returns.
Yadav outlines the advantages of using hybrid funds, such as balanced advantage funds, alongside a Systematic Withdrawal Plan (SWP) to generate consistent income.
These funds, with a blend of equity and low-risk instruments, offer favorable tax treatment and provide a safer alternative to sector funds, which can be volatile and require precise timing.
Additionally, Yadav explores the potential of equity savings funds for low-risk, inflation-adjusted returns and highlights upcoming opportunities in hybrid funds following changes in the Union Budget of 2025.
Query from Ranjiv Tandon:
Investor Profile:
Name: Ranjiv Tandon
Age: 66 years (Senior Citizen)
Employment Status: Not working
Investment Amount: Rs 15-20 lakh (shift from bank FDs)
Risk Appetite: Average
Objective: Generate monthly income from mutual funds with less risk through an SWP (Systematic Withdrawal Plan)
Current Plan:
Funds considered for investment:
ABSL Balanced Advantage Fund
HDFC Balanced Advantage Fund
HDFC Manufacturing Fund
SBI Balanced Advantage Fund
Q) Is this the right investment approach for a low-risk monthly income?
A) The approach of investing in hybrid funds and then using a Systematic Withdrawal Plan (SWP) to generate regular income can be effective.
Currently, the investor is considering balanced advantage funds, which typically allocate equity between 30% and 70% and invest the remainder in low-risk instruments.
These funds are taxed as equity funds, offering favorable tax treatment compared to fixed deposits or debt mutual funds. On the other hand, sector funds are higher-risk investments.
They are fully invested in equities and lack diversification, which increases their volatility. Additionally, sector funds require careful timing for both entry and exit, making them less suitable for investors who are new to Indian equities.
Q) Can you recommend any other funds or categories that provide good inflation-adjusted returns with low risk?
A) Another category of funds to consider is equity savings funds. These typically have a lower equity exposure, ranging from 15% to 45%, and are taxed as equity funds.
Depending on your risk tolerance and investment goals, some allocation to equity savings funds could be appropriate.
Additionally, the Union Budget of 2025 altered the taxation for hybrid funds (those with less than 65% equity and less than 65% debt) to 12.5% if held for more than 2 years.
Mutual fund houses are expected to introduce new funds in this category. This presents another potential option for investors to explore.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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