Mutual Funds

Your Fund Portfolio

Anand Kalyanaraman | Updated on June 28, 2020 Published on June 28, 2020

I have 5X amount today. I want to invest such that I would get X amount at the end of each year for five years, starting from the third year onwards. In other words, I would need X amount at the end of the third, fourth, fifth, sixth and seventh year. How do I construct the portfolio, and what funds should I choose? The safety of 5X or X every year is of primary concern, along with the return.


The X factor is clear

You want to invest 5X, now and here

From Year 3 to 7, you want back X (plus return) every year

All this without fear; you hold the money dear

Let’s say your X is 100

So, with 5X, you have 500

Now, here’s something you can do

Put 100 each in five bank FDs, not just one or two

The deposits should be the cumulative kind

So, on maturity you should some returns find

Deposit 1 will mature in year 3, Deposit 2 in year 4

This is how it goes in a laddered-portfolio tour

Deposits 3, 4 and 5 will mature in years 5, 6 and 7

At the end you should be in goal-met heaven

Bank deposits are relatively safe — insured up to ₹5 lakh per bank

Your FDs will accrue interest, they’re unlikely to tank

FD rates are down, yes, but there’s still many a good deal

IDFC First Bank’s 7.25% for 1-10 years, for instance, seems like a steal

Small finance banks also offer a relatively good rate

That might entail though a bit more risk on your plate

And if you’re game for some more risk, some debt funds, too, in the store

The tax treatment is concessional, if you hold them for three years or more

Tax at 20% with indexation can mean a better post-tax bargain

On bank FDs, the tax is at your slab rate, this can be a pain

But debt funds come with higher risk, not as safe as bank FDs

Choose wisely from these funds, don’t miss the woods for the trees

If debt funds you are opting for, go for the safer ones

Corporate Bond category maybe, or Banking & PSU funds

Here, too, stick with those with most securities rated AAA

Given your need for safety, best to keep riskier ones away

BusinessLine Portfolio Star Track MF Ratings can guide you along the way

Check for funds with 4- or 5-star ratings, they can be the mainstay

Kotak Corporate Bond fund is a fine choice in its set

Among Banking & PSU funds, the Axis fund is a good one to get

Take back from the funds through a systematic withdrawal plan

It gives flexibility to get the money as per your time span.

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Published on June 28, 2020
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