Express Money: Ask Us

I am a retired government official and I want to invest my retirement benefits in schemes which can give me returns of 15- 30% in a span of 3 to 5 years.

Ramaprasad SV

Getting 15-30% returns annually for next 3 to 5 years is very difficult. Please remember that the equity market has given 17% returns annually on average over last 20 years. I would suggest you please do not risk with your money for higher returns. Investing to get 15-30% returns is fraught with extreme risk and it may result in losing a part of your savings in next 3 to 5 years. It would be good to invest in debt funds or balanced funds. The returns can vary from 7-10%. Moreover, when the interest rates go down, they also appreciate in value. Now, is good time to go for debt fund because the interest rates have peaked and there is very good chance that it would come down over next 1-2 years. The other fund is balanced fund which invest a part in equity. If you have 3-5 years horizon, go for balanced fund. You can invest a part of money in balanced fund and a small part (10% of your fund) in equity fund. Equity funds are those that invest in equity market, high risk but high returns. However, over a time horizon of 3-5 years, balanced funds and equity funds perform extremely well giving you a return of 12-18% CAGR.

My father is 51 years old and has a corpus of Rs 15 lakh. He would like to first cover up our ICICI bank home loan.How much will be the pre-payment penalty? Also kindly suggest some investment options.

Kshitij Chautre, Nagpur

RBI has ordered banks not to charge pre-payment penalty. As far as investing before retirement is concerned, you can invest directly in stocks or through mutual funds. The best option would be to go for mutual funds. Start a systematic investment plan (SIP) in mutual funds. Since you have 8 years time, you can divide your investing amount in 3 parts (20%, 40%, 40%). Put the first part in pure equity mutual fund. Equity funds provide better returns (about 12% to 18%) over long term. The second investment can go to balanced funds, which provide about 10 per cent to 14% but the risks are low. The last part should go to debt funds, which are safer and will give you a return of 8-11%. Once this is done, you also have option to put money in a monthly income plan which provides you monthly income to meet your expenses. However, you could think of this option when your father retires.

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