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How to plan your Retirement with Mutual Funds

Janhavi Shinde Janhavi Shinde 14 January 2019

Retirement days should be spent as easy as a pie. But to enjoy these days, you need to start planning well in advance. Here, we tell you how to live life stress-free in your most awaited golden years.

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Most of us must have grown-up reciting theorems, history and what not. But, no one taught us ways to manage the money earned with our sweat and blood. Even today, we let our funds lie untouched in our bank accounts. Or worst case, we overspend not focusing about the future.

It's good to live in the present till the time you earn. But, what about the day when you retire and there is no regular income flow? How about living a life stress-free, at the same time enjoying life without making any financial compromises? But, how do you start planning for your retirement? Well, the idea is simple.

The Planning…

Start investing in a small sum regularly in mutual funds. There are other instruments like a pension plan, PPF, and Government bonds, where you get a fixed amount of return with a certain lock-in period for your investment. Studies have proven that investing in mutual funds through SIP (Systematic Investment Plan) over a long period is the best way to create a corpus for your retirement. Equities have the potential to give inflation-beating return rates.

Investment in mutual funds is the diversified investment option that gives you the privilege to select investment alternatives that suites the best for your financial goals. We advise you to start planning for your retirement with mutual funds at an early stage of your life to enjoy the benefits of long-term finances after retirement.

You have an option to choose a suitable proportion of equity and debt that gives maximum returns with calculated risk.

What are SIP’s?

A systematic investment plan could be the key to your post-retirement life. It is one of the most preferred ways to invest in mutual funds. You can invest as low as rupees 500. Below are some advantages of investing in mutual funds.

  • SIP enables you to invest the smallest amount on a monthly basis that helps you to create a corpus for your retirement life without hampering your current expenditure.
  • Mutual funds give you the privilege to switch between funds from the same fund house. You can anytime increase or reduce the amount of SIP. Also, you can shift from equity to debt fund. As a young investor, you might be willing to take higher risk for higher returns by investing in equity investment model. However, as you move near to retirement age, you may shift to debt funds as less risk is associated with it.
  • By investing in mutual funds, you can withdraw specific amount on a monthly, quarterly or yearly basis to have a regular source of income post-retirement.

Best Mutual Funds to create a Retirement Corpus

Retirement life is often termed as second innings of your life after the years of hard work. You get time to fulfil your long-cherished dreams and to pursue your hobbies. Post-retirement you need a regular income which you have to plan during your working years. Many large mutual funds companies have designed a series of funds primarily to invest in for retirement purpose.

It is a great decision to start investing in mutual funds in the early age of your life. However, do not pick any random amount as a target corpus. Calculate your current expenditure and add a minimum of 10 percent inflation to arrive at a realistic figure that you will need after 25 or 30 years.

The next thing is to find out how many funds you need to save for your living expenses. If you are unable to figure out the right amount of living expenses, you may target to save 25 to 30 percent of your current income. Target debt funds to meet short-term goals up to 5 years, and consider investing in equity to take care of your long-term financial plans such as retirement.

Creating a mutual fund portfolio can be a complex task that involves several steps. We advise you to shortlist a few schemes that are giving consistent long-term returns to the investors. List down your investment goals and risk appetite.

The mutual fund SIP portfolio can be created for three individual risk-profiles: aggressive, moderate and conservative. We have compiled the best mutual funds to invest in retirement funds.

Recommended portfolio for Conservative Investors

SIP AmountScheme NamePercentage
Rs. 2000 to 5000SBI Bluechip Fund50
ICICI Prudential regular savings fund50
Rs. 5000 to 10000SBI Bluechip Fund30
ICICI Prudential Bluechip fund20
UTI regular savings fund50
Above Rs. 10000SBI bluechip fund
ICICI Prudential Bluechip fund, Motilal Oswal Multicap 35 Fund 15, 10
UTI Regular Savings Fund50

Recommended portfolio for moderate investors

SIP AmountScheme NamePercentage
Rs. 2000 to 5000SBI Bluechip Fund65
ICICI Prudential regular savings fund35
Rs. 5000 to 10000SBI Bluechip Fund40
Motilal Oswal Multicap 35 Fund25
ICICI Prudential regular savings fund35
Above Rs. 10000ICICI Prudential Bluechip fund30
SBI Bluechip Fund15
Motilal Oswal Multicap 35 Fund20
UTI Regular Savings Fund35

Recommended portfolio for aggressive investors

SIP AmountScheme NamePercentage
Rs. 2000 to 5000SBI Magnum Multicap Fund50
ICICI Prudential Bluechip Fund50
Rs. 5000 to 10000Motilal Oswal Multicap 35 Fund30
SBI Bluechip Fund20
ICICI Prudential equity and debt funds15
Mirae Asset Emerging Bluechip Fund35
Above Rs. 10000ICICI Prudential Bluechip fund35
SBI Magnum Multicap Fund10
Mirae asset Emerging Bluechip Fund30
ICICI Prudential equity and debt funds10
Tata Equity PE Fund15

So the mantra…

When it comes to investing in retirement planning, the best rule of thumb to follow is- “The earlier, the better.” The best mutual funds to invest in retirement purpose is the one that has low expenses and the one that you have to choose after a detailed analysis. Also, you should take into consideration a few factors such as tax exemptions, social security and the regular income that you expect post-retirement.

While selecting mutual funds, you need to evaluate the risk-return relation they have to offer. Mutual funds have a wide variety of schemes, they are transparent and investor-friendly. Moreover, you should have a diversified portfolio that has a positive correlation with different investment schemes.

There are a variety of mutual funds to meet almost every need and risk appetite, for both equity and debt classes. Besides, the return potential of each type of investment instrument varies according to the risk they take. Therefore, it is crucial to recognize the risk-return potential of the mutual funds you pick for your retirement goals.

Recommended Read: How to Choose the Best Pension Plan in India

Janhavi Shinde
Written by Janhavi Shinde
Right from being a Flight Attendant to a Banker and now to a Content Writer, she has tasted success in all the fields. The kinda girl who loves pets and knows how to manage difficult people and events.