Subbu's Solution

One of my customer (Retired) in MF is opting for only Dividend option. He has invested in 12 different funds in nearly 36 schemes (56 L). Large cap/Diversified/Balanced/MIP etc. Will it be a better idea to have 50% allocation for Div. and remaining for Growth? Can I reduced his portfolio in 6 MF with 12 schemes? How can I convince him for only Growth option? Any special benefit for opting only for Div. option (other than Income Tax).I will be grateful if U help or guide me for the same query. - Anil Tillu
Even though Quantum Mutual Fund is a direct-to-investor, it is our pleasure to answer a query by a distributor. Rather it makes me feel good of the fact that being a distributor you are so concerned about your investor's investments. A good distributor could help many investors plan their finances properly.

Coming to your question Mr. Anil, your customer (Retired) is in his distribution phase (This is the stage when the investor needs regular money.) of life. Dividend option is apt for him. This will allow him to get some regular income via his investments in mutual funds. However, it appears from the description given that the customer has too many funds and it would be advisable to reduce the number of funds and or schemes. You could also look at making some allocation to Gold.

If your client’s income needs are met then you can convince him on growth option by explaining the effects or advantages of compounding. You can mathematically show that some portion invested in growth option would continue to compound well. This compounding will allow him to build further corpus for the future. If the client is comfortable with the income he receives, then he may be open to the idea of foregoing some income now in order to allow the corpus to grow.

Given that your client is retired and needs income, you should keep that in mind and make no recommendations that will compromise his income needs.

Apart from mutual funds, you could consider Senior citizen saving schemes and post office monthly income scheme as well. You may also look at some high quality corporate fixed deposits.


Subbu's Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.

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