Let us say mu monthly expenditure is 100 and I have a corpus to last for 15 years, that is 100X12X15=18,000, in effect requiring a return of 6.66% on the corpus for yearly survival (not including inflation for now).
The yearly return from stock Mutual Funds (MFs) (selected) is -3% to 23% and debt MF (selected) is 8%. Assuming an inflation rate of 5-6% on average, can this corpus be invested in a combination of Debt & Equity MFs to generate enough monthly returns to last for 25 years (this time adjusting for inflation)?, for rest 15 years I can eat into the corpus, it would not matter, taking a life expectancy of 85 years.
One strategy that comes to mind is to invest in MFs for large cap funds (for some extent of stability), below is a 'middle-of-the-road' fund and it's returns
2017 14.8 4.8 2.8 6.7 35.3 2016 -3.4 10.6 7.5 -6.8 10.0 2015 3.0 -0.6 -0.9 -0.1 3.9 2014 7.3 20.6 9.2 12.3 59.0 2013 -9.5 3.6 -1.5 11.4 5.0 year Q1 Q2 Q3 Q4 Yearly
and withdraw monthly/quarterly/yearly basis, whatever is the return as long as it's +ve.
This way, when the returns are high (like 35%), there would be more returns and the excess can be invested in other avenues, when returns are low, the excess returns from previous years can be used.
The actual investment of course would be in a mix of debt and equity MFs and direct stocks and bonds.
My question is, is this kind of retirement doable and if so what kind of calculations do I need to do to arrive at 2 things:
- an approximate portfolio mix
- a withdrawal strategy