This article will help you know in detail about such schemes and evaluate whether it’s beneficial for you to invest in them or not.
What are Mutual Fund Retirement Plans?These are a special type of mutual funds introduced by the Securities and Exchange Board of India (SEBI) in 2017. These are dedicated funds, designed for the purpose of creating a retirement corpus for the investors. These mutual funds generally have a lock-in period of 5 years or till the retirement of the investor, whichever is earlier.
Should you invest in such type of funds?Many people prefer to invest in long-term government bonds, Fixed Deposits, and government pension plans such as National Pension Scheme (NPS) to create a corpus for their retirement. However, financial advisors believe this is a very myopic view of planning for your golden years.
Retirement mutual funds are an attractive investment option where you can invest to gain lucrative returns. Mutual funds have the capability of producing inflation-beating as they are managed by professional fund managers. Moreover, you can choose to invest in a mix of equity and debt funds, based on your risk appetite and investment horizon.
Also, they are highly flexible as you can start investing in them through a Systematic Investment Plan (SIP) of as low as Rs. 500.
Benefits of investing in Retirement Mutual Fund Scheme
- As retirement mutual funds invest in a mix of equity, debt and money market instruments; they are able to provide stable returns to the investor. These funds usually carry a lesser amount of risk.
- The investors can choose different combinations of debt and equity as per their risk profile. The equity exposure in retirement mutual funds ranges from as low as 30% to as high as 100%, spread over multi-cap and large-cap options.
- The feature of the lock-in period will work well for an investor who demonstrates jittery investment behaviour. It will inculcate the necessary investment discipline in an investor and help him/her build a large retirement corpus.
It makes sense to invest in retirement mutual fund schemes as it will help you to yield inflation-beating returns and create a substantial corpus for your golden years. However, it’s crucial to choose a right balance of equity and debt as you’ll not be allowed to rebalance your portfolio at a later stage, unlike the open-ended funds.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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