How should I park my retirement corpus?

How should I park my retirement corpus?
- Jairam Prasad

Transcript: There are 2-3 things which one should keep in mind.

1. You should invest in a manner that you are not exposed to huge risk. The way to do it is to invest in a conservative vehicle and spread your investment in a manner that you are able to eliminate the possibility of catching a market high. These are two things which you should keep in mind. Consider a balanced fund and spread your money in a way that if you invest today and the market goes down by 20% and your balanced fund goes down by 15%. Spreading out will actually average it out. There is a possibility that you will miss some opportunity but missing that opportunity will be worthwhile. You will be able to withstand the market volatility much better.
2. Then comes the withdrawal plan. While looking at the return you have to look at two things. One is the return and the other is the taxability. Hold your investment for next five years, as I am confident that in the period a balanced fund is definitely going to beat the fixed income return unless there is a calamity. To reduce that calamity, you can add a third layer which is don't invest all your money in a single balanced fund. Spread it over at least two or three balanced funds, so that you are not overly dependent on one fund manager's failure.

Five years from now, the money would be fully invested, will be fully deployed. You will get decent returns, and also avoid the possibility of catching a market high. And all the return that you derive from there will be completely tax-free because you are through with your investment time frame.

Consider a conservative annual withdrawal rate of 5% from that kind of portfolio. After 5 years, the money would have also appreciated. This will ensure that your money is growing, and will continue to grow. And you will withdraw a very small part of it. The money will not only grow but will also ensure that you are able to build an inflation-adjusted income framework for yourself.