Investment plan for a 65-year-old

First, define the objective
It is important to chalk out what she intends to derive from this investment.

• Is she looking for a regular income to meet her expenses?
• Does she want to invest for wealth creation with some occasional withdrawals, if need be? Or
• Does she want to invest to accumulate a larger corpus for her heirs?

Investing for income
If she intends to derive a regular income, then she must invest about (one-third) Rs 10 lakh in equities and the rest in fixed income.

For the equity allocation, she can invest in a good flexi-cap fund over the next 12 to 18 months. This will help her generate inflation-adjusted income for the later years of her life. Further, she should invest in Senior Citizen Savings Scheme (SCSS). This will help her derive guaranteed regular income. On a sum of Rs 15 lakh, she will be getting about Rs 28,000 every quarter.

The rest of the money can be invested in good quality short-duration funds. Periodic rebalancing of the portfolio is a must and she should ensure to keep the annual withdrawals less than 6 per cent of the total corpus. Know how to build a portfolio to generate regular income.

Investing for growth
However, if she is not dependent on the income from these investments, a conservative approach would be to have an asset allocation of 50:50. For fixed-income, good quality short duration funds can prove to be good. For equities, she can choose flexi-cap funds or even a conservative large-cap fund.

But here, the money meant for equities should not be invested in one go. Rather, it should be split over the next 18 months to two years.

Alternatively, if she is ready to take slightly more risk, then aggressive hybrid funds can be a wonderful alternative to invest in over the next 18 months to two years. These funds invest about two-thirds in equity and the rest in fixed income. While equity allocation helps generate higher returns, fixed-income allocation brings stability and cushions the downfall during a market fall. Also, these funds auto re-balance their portfolio and generally maintain about 70 per cent in equities. This will protect her from the hassle of regular portfolio rebalancing.

Suggested read: Deriving income from investments