PrudentGain, our comprehensive wealth creation service has three clearly defined stages: Plan, Invest and Harvest. At Plan stage, we devise an investment plan for creating long term wealth for a comfortable and prosperous retirement for our clients. At Invest stage we put this plan into action to achieve the target retirement corpus and lastly at Harvest stage, we deploy our yield generating strategies to earn the desired retirement income from the accumulated corpus.
Of these three stages, at Harvest stage, the target retirement corpus has been achieved and it is time for the income generation to begin. Our unique yield generating strategies ensure that not only do our clients earn perpetual income from their corpus, but also the risks are kept at low to moderate levels as per client risk profile. Here we discuss a few approaches to income generation followed by us.
Components of income generating portfolio:
An income generating portfolio comprises of two parts: A near risk free component invested in instruments such as liquid funds and the second component comprising of moderate risk instruments such as index ETF combined with index derivatives instruments. The proportion of these two components in the portfolio depends entirely on client risk profile and risk, return requirements.
Out of above mentioned components, it is the strategy of combining index ETF with index derivatives that needs to be explained in more detail. So how does it work and how do we generate regular income out of index funds?
In essence we invest the capital allocated to index fund entirely in the specified index ETF. This ensures market linked returns at negligible cost. In addition we hedge this investment by buying index options to the extent of no more than 1% of base capital. The idea here that if the market crashes, the hedging positions generate profits to offset losses suffered in index ETF. Part of these profits are withdrawable in the form of income. On the other hand, if the market rallies, the loss on hedging positions is offset by rally in index ETF and part of the net profit is withdrawable as profit. Thus client capital is at all times protected from high volatility and risk.
If you are looking to improve the yield on your fixed income capital or are trying to earn extra income out of your accumulated investments, please get in touch with us. We offer a Virtual HelpDesk for our clients, where you can request a free video consultation with us to answer your financial and investing queries.