How to invest Rs 2 crore to earn monthly income of Rs 2 lakh
To earn an income of Rs 2 lakh per month or Rs 24 lakh per annum from the corpus of Rs 2 crore, you must return of 12 per cent. However, there is no fixed income instrument that can currently offer you such rate of return.
Jayant R. Pai, CFP and Head-Products, PPFAS Mutual Fund replies, "Your total corpus amounts to a little over Rs 2 crore, assuming you are able to redeem the entire amount and ignoring all the tax implications. You want to earn Rs 24 lakh a year from this corpus. This translates to 12% returns. There is no reasonably safe fixed income instrument that can offer you that rate at present. The rates prevailing today are in the range of 7-8% per annum. Also, assuming a lifespan of 75 to 80 years, you will have to tackle reinvestment risk several times from the time you retire. It is prudent to factor in some inflation too. Given this scenario, you will either have to either increase your savings markedly before you retire, or extend your career by a few more years in order to attain the requisite corpus. Of course, any rise in interest rates in the interim will help you, but it is not wise to rely on that hope alone."
I recently sold my house. I want to invest Rs 10 lakh from the proceeds in mutual funds. How should I allocate the money in order to receive 12% CAGR in the next 3 to 5 years?
Vidya Bala, Co-Founder, Redwood Research replies, "Please allow at least 5-7 years for your investments to give the expected returns. Allocate 75% to equity and 25% to debt. For the debt portion, consider investing a lump sum in HDFC Short Term Debt and Axis Banking & PSU Debt. For equity, invest 25% each in Mirae Asset Large Cap, Parag Parikh Long Term Equity and Franklin India Prima using STPs over six months to a year. If you haven’t exhausted your Section 80C limit, you can consider tax-saving funds. Else, stick to regular equity mutual funds."