Can you please tell me appropriate asset allocation in mutual funds

1. Please note that your fund selection is good but you have invested in too many funds.

2. You have invested in too many fund categories as well. Since you are retiring in 2017, our suggestion would be to consolidate your funds into 2-3 categories and avoid mid and small cap funds, if not totally, at least partially. The fund category suitable for you could be - diversified equity, large cap, balanced funds and liquid funds.

3. Since you have asked about right asset allocation of mutual funds, please note that there is nothing called right asset allocation within mutual funds. Selection of mutual funds should be based on your risk taking ability which decides the allocation between the different fund categories.

You have mentioned your risk appetite as 'reasonable', and also that you have substantial investment in tax free bonds, PPF etc. apart from pension, therefore, we think you should go for 50-50% allocation between debt and equity mutual funds.

Further, instead of investing in debt funds directly, you can invest in balanced funds as these funds invest around 30-35% in debt. We are suggesting this because the long term capital gain tax is free on returns of balanced funds.

Whereas, taxation is bit high in debt funds as you have to pay long term capital gain tax post indexation (Also, the classification of long term in case of debt is 36 months and above whereas in case of equity or balanced fund it is more than one year only).

In this context, do read this - https://www.advisorkhoj.com/articles/Mutual-Funds...

However, you should invest some amount (approx 6-8 moths of monthly expenses) for emergency purposes in liquid funds and use them whenever you require.

With regards to withdrawals from January 2018, our suggestion would be to go for SWP. You can decide a fixed amount not exceeding 8-9% of your total investment in mutual funds and withdraw the amount systematically every month.

You have mentioned that you will never touch the original investment. This is a wrong idea as you need to monitor your mutual fund portfolio regularly and review it at least once every year and change the fund/s not performing well with the ones that are performing very well.

Hope the above helps ! thanks for writing to Advisorkhoj !!