How to leave a legacy of a good corpus for my son

I am a senior citizen with no financial commitment, having interest income within taxable limit of Rs.3 lakhs pa. I live in my own residence with my spouse and have ample medical cover. My employed and independently settled son supports me financially every month even though I advised him to save that amount in suitable mutual funds. My FDs amounting to Rs.10 lakhs maturing in various months from April to November 2017 may not be worthy of renewal due to reduced rate of interest. Since I don’t have to depend on returns from the above FDs for my monthly expenses and that I would like to leave a legacy of a good corpus for my son, I have in mind the following options: 1) Invest the FD amounts, as and when they mature, in Sr. Citizens Savings Scheme (SCSS) fetching 8.4% p.a. at present, as I am now within Rs.15 lakhs limit each for me and my spouse. And invest the SCSS returns in monthly SIPs in two MFs (Multicap and Midcap) for 5 years. OR 2) Invest the entire 10 lakhs as and when the FDs mature, as lumpsum of Rs.5 lakhs each in (a) ICICI PRU VALUE DISCOVERY FUND and (b) SBI MAGNUM BALANCED FUND and allow the investment to grow to a good corpus. Which option do you suggest would be ideal for me in order to generate a better corpus? I do not like to get into debt funds with uncertain returns, as even with the fixed 8.4% interest on SCSS; I will be within taxable income?

Apr 26, 2017 by TVP Kakshan, | Mutual Fund

The option you chose will depend on your investment objective. If for any unforeseen reason you fear that, you may have to depend on the FD maturity amounts for your and your spouse's expense needs in the future, then the first option may be the more prudent one for you.

However, from your query it seems that, the you do not need the FD principal or interest for your income needs and you want to invest the FD maturity amount solely for the purpose of inheritance for your son. If this assumption is correct, then the second option is far better. If you invest in SCSS and re-invest the interest in MF SIPs over the next 5 years (maturity term of SCSS), your average cost of purchase of mutual funds is likely to be much higher than if you were to invest in lump sum right now because the market, interim volatility notwithstanding, is expected to be much higher in 5 years, than what it is now.

If you are worried about short term volatility in the market, then you may invest in liquid funds of ICICI Prudential and SBI Mutual Funds and transfer fixed amounts to the equity funds of your choice on a monthly or fortnightly basis through Systematic Transfer Plan over the next 6 months. This will average out the purchase price.

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