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Mutual Fund Corner. Q: 34-year-old Rahul Verma writes us from Delhi. My mother is 61-year-old and is a retired teacher. She got Rs 15 lakh after retirement, which was invested in Senior Citizen Saving Scheme (SCSS). She is getting approximately Rs 30,000 quarterly and is keeping it for my younger brother's marriage expenses, which will happen in 1-2 years. Apart from this, she receives Rs 2,500 monthly as a small pension under the Employee Pension Scheme. She has an active Public Provident Fund (PPF) account valid till 2023. Investment Scope: She wants to invest Rs 2,500 monthly for five years for better post-retirement life and address inflation over the years. She wants to invest in SCSS interest earn money (Rs 30,000) in a safe instrument, which can give better returns than the savings account, but she should be able to liquidate it as and when required for marriage or any emergency. Queries: Should she invest Rs 2,500 monthly in her active PPF account as it has eight percent return with EEE feature? Should she invest in large cap or debt mutual fund? If yes, please suggest some good fund options. Please suggest which is the right instrument - senior citizen fixed deposits or ultra-short duration fund for investing SCSS interest earn amount. Please suggest a good fund. Is investing Rs 15 lakh in SCSS was the right decision considering short term capital gain.
A: Considering that she is probably in a lower tax bracket, the EEE feature of the PPF may not make it as attractive as it is for investors in the higher tax brackets. Considering the five-year view that she has and her objective of beating inflation, an aggressive hybrid equity fund like ICICI Prudential Equity and Debt Fund - Growth through a monthly SIP of Rs 2,500 per month may be a good option for her to consider, rather than a large cap or a debt fund.
Bank fixed deposits or ultra-short term funds are both options as yields are likely to be similar, but ultra-short term funds are preferable as they can be set up for quarterly SIPs in an automated manner and can also be withdrawn without any penalties whenever needed to support the emergency and marriage goals. The Kotak Savings Fund - Growth may be a good option to consider in this space, due to its high-quality papers and reasonable expenses.
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