How to plan retirement fund with mutual funds

Published: June 4, 2018 2:58:00 AM

It is advisable that an investor starts his retirement planning on the first day of the job. It will add value to your planning.

retirement fund, mutual fund, SIPPlanning is essential for anyone whether it is a holiday, a birthday celebration or any other event.

Planning is essential for anyone whether it is a holiday, a birthday celebration or any other event. We live in a modern world where various amenities help us to plan and execute. Till the time you have regular source of income you need not worry much about the financial assets of those plans. However, after retirement, regular source of income could potentially vanish but expenses will remain.

It is advisable that an investor starts his retirement planning on the first day of the job. It will add value to your planning. You can raise your investments in line with rise in income which will be beneficial for life even after retirement. You may come across various investment vehicles which may help you in financial planning, retirement planning etc.

Mutual funds

Investment in mutual funds is one of the most diversified investment option that gives you the liberty to select investment options best suited for your financial goals. Plan your retirement with mutual funds at an early age and then enjoy the benefits of long term investments after retirement.
Apart from equity and debt, you have balanced fund where you can avail benefits of asset classes, equity and debt. Volatility and risk is comparatively higher in equity markets compared to debt funds.

Generally, young people are willing to take high risks and prefer investing in equity funds. However, investment in debt funds is suitable for the elderly as risk of losing the principal amount is comparatively less. Moreover, gold is looked upon as a diversification tool. One must also have 10 – 15% allocation in gold in their portfolio.

How to invest?

Systematic Investment Plan (SIP) could be your key to a happy retirement life. One of the preferred ways of investing in a mutual fund is through a SIP. In SIP, you can invest every month with a minimum amount of Rs.500. While SIP makes you a disciplined investor, it also gives your money professional fund management skills which helps you achieve your goal of retirement planning.
Following are 3 advantages of investing in mutual funds especially for retirement planning:

SIP: Systematic Investment Plan (SIP) allows you to invest a minimum amount on a monthly basis which helps to save money for retirement life without disturbing today’s expenditure.

Ability to switch: As a young investor, you might be able to take higher risks for higher returns, hence investment in equity is the best investment model. However, as you near your retirement age, it is advisable to gradually shift your investments into lower risky assets like debt funds. A mutual fund offers you the facility to switch between funds of the same fund house. A Systematic Transfer Plan (STP) allows you to systematically move specific amounts from one scheme to another, in this case from equity to debt.

Regular income: Mutual funds allows you to automatically withdraw specific amounts (or units) on a monthly/quarterly/half yearly/yearly basis. It provides you a regular source of income even after retirement.

To conclude, a key difference in life before and after retirement is source of income which is not available after retirement. Investment in mutual funds will help you avail a regular source of income with benefits of diversification of risk. You could choose the most suitable fund for a better retirement life.

Source: Quantum MF

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