With the fixed deposit interest rates coming down, several retired individuals are looking for alternative investment avenues to supplement their income. Some financial planners are asking these individuals to invest in mutual funds and opt for a Systematic Withdrawal Plan (SWP) to augment their income. An SWP allows investors to withdraw a fixed amount regularly by redeeming mutual fund units from the initial investment.
"Dividends are not guaranteed. You cannot depend entirely on them to take care of your expenses," says Veena Malgonkar, Certified Financial Planner, KM Wealth Solutions. As per Sebi mandate, a mutual fund scheme cannot distribute dividends out of capital. It can distribute dividends only from its profits or `realised gains'. This is the main reason why mutual fund advisors believe SWP may be better option for retired folks.
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