How should a retiree invest Rs 60 lakh to generate a monthly income of Rs 30,000?

My father will retire from his government job next December. He will get around Rs 60 lakh in retiral benefits. How should he invest this money to generate a monthly income of Rs 30,000, while keeping the principal intact? He also wants to build an emergency fund and invest in mutual funds. Please advise.

Raj Khosla, Founder and Managing Director, Mymoneymantra.com replies: A senior citizen’s portfolio should carry low to medium risk and yield assured income, along with capital protection. The target to generate Rs 30,000 a month is achievable by investing in a mix of financial instruments. He should invest up to Rs 15 lakh in the Senior Citizens Saving Scheme (SCSS). It is the safest investment option for retirees and offers 8.6% per annum, payable quarterly. He can contribute Rs 4.5 lakh in the Post Office Monthly Income Scheme at 7.6 % per annum.

As you want to keep the principal intact, it is advisable to save Rs 15.5 lakh in Senior Citizen Fixed Deposit and earn 7.3% to 7.5%. Also, invest Rs 10 lakh in tax-free bonds. The balance Rs 15 lakh can be invested in debt and liquid mutual funds with a horizon of three years or more. You can invest Rs 5 lakh each in Franklin India Short Term Income Plan, Aditya Birla Sun Life Liquid Fund and SBI Magnum Ultra Short Duration Fund. The returns will be tax efficient and would offer liquidity for emergency. Retirees should stay away from equity mutual funds which are highly volatile in nature.

I invest Rs 43,000 in MFs through SIPs. I put Rs 8,000 each in Aditya BSL Frontline Equity and Franklin India Bluechip, Rs 5,000 each in Mirae Large Cap and L&T Equity, Rs 6,000 each in Franklin India Prima and L&T India Value and Rs 5,000 in Franklin India Smaller Companies. Am I on the right track? I want to invest another Rs 30,000 a month.

Rahul Parikh, CEO, Bajaj Capital replies: A 49% allocation in the large-cap category is excessive. It can lead to concentration risk to the overall portfolio. Consider shifting from Franklin India Bluechip Fund to SBI Magnum Multi Cap Fund. For the additional Rs 30,000, consider investing Rs 10,000 each in Axis Small Cap & Kotak Emerging Equity Scheme. The remaining Rs 10,000 can be divided equally among SBI Magnum Multi Cap and the existing L&T Equity Fund.