When should one shift equity mutual fund investment to debt investments?

I have turned 50. I have been investing in equity mutual funds for various goals. At what age should I switch from equity to debt?

This is a critical question for which different people give different advice. The answer would also vary depending on the specific goal for which specific investments were made and the flexibility of the goal. For your child's education, you should start withdrawing from your investment at least one year before the goal date through a Systematic Transfer Plan (STP) over the next 12 months. For your retirement goal, shifting the entire corpus from equity to debt is not advised, as the goal is a continuing one and lasts for at least 20 years.

Shift Funds 5 Years Before Retirement

So my suggestion would be to start shifting five years before your retirement by way of monthly STP; the amount of monthly STP should be equal to your monthly expenses after your retirement to ensure that you have a corpus equal to five years’ expenses parked in debt funds at the time of your retirement. Please keep replenishing the corpus through STP to ensure that at any given time, you have five years’ expenses in debt funds.

If you have any other regular income, like rentals or dividends, to fully cover your regular expenses, you can continue to keep the money invested in equity to create better wealth and a good legacy for your children. While determining the amount of STP, please take taxes to be paid into account.

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Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his X handle.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.