As per the latest data from World Health Organisation, published in 2017, the average life expectancy in India has risen to 69 years, up from 57 in 1988. This means that the post-retirement life span of a normal person is longer now than it was before. But how many are actually prepared for it? Rising inflation, along with medical costs, and the cost of living could eat into your life long savings. Even the pension that some government employees enjoy after retirement might not suffice considering the expenses of living for another 10 to 20 years or more.
For long, and even now, safe and secure saving options such as Post Office schemes, Fixed deposits, Kisan Vikas Patra, Tax saving FDs, Tax-free bonds and more recently Senior Citizen Savings scheme have been the preferred choice of retirees. Most of these offer higher interest than prevailing rates. However, to ensure a regular income in old age, one needs a mix of both fixed assets as well as liquidity to cater to unforeseen expenditure such as a medical emergency. Which is why it helps to have mutual funds as a part of your portfolio.
A common misconception is that they are risky and hence one should stay away from them. However, unlike shares, MFs represent a hands-off approach to entering the equity market by collecting the savings of a number of investors who share a common financial goal. The fund manager then invests the money in different types of securities ranging from shares to debentures to money market instruments, depending upon the scheme’s stated objective. On Finserv MARKETS, you can choose a mutual fund that suits your goal, be it wealth creation or retirement corpus as per your needs.
If you are starting out, begin with small investments which are spread across different companies, making your portfolio diversified. Your investments are managed by professionals with considerable expertise and experience who thoroughly analyse markets and economy, picking favourable investment opportunities, so you get higher gains. There is complete transparency on investment strategy, with regular updates on your fund value along with the investments made by various schemes, and the proportion of funds invested in each asset type.
You will also have to undertake a process known as Know Your Client (KYC) a one-time exercise valid for investing across all mutual funds. You can then start investing in MFs which are broadly classified under two categories—equity and debt. Usually, it is advised that if you are a beginner, start with liquid funds. They invest in securities with a residual maturity of up to 91 days. The assets invested are not tied up for a long time as liquid funds do not have a lock-in period. These offer slightly better returns than a fixed deposit and offer quick withdrawal in times of need.
Next come Debt mutual funds which invest in fixed income securities such as Treasury Bills, Government Securities, Corporate Bonds, Money Market instruments and other debt securities of different time horizons with a fixed maturity date. These offer liquidity with decent returns compared to traditional instruments. Within the debt fund category, it is advisable to select funds that hold high-rated bonds and have lower average maturity portfolios. These offer moderately more returns than an FD, and slightly more than a liquid fund.
In the equity category, one can opt for the least volatile option i.e large-cap mutual fund, which invests most of their assets in companies- the top 100 companies in terms of market capitalization, making them less vulnerable to market volatility due to their strong fundamentals. These offer a return much higher than liquid or debt MFs and are suited with those with a higher capacity to take risk.
Consider starting your mutual fund investment journey via Finserv MARKETS, a portal that plays host to a wide range of India’s top mutual funds. Benefits include 0% commission or brokerage, super-fast account opening and intelligent portfolio insights to allow you to keep a tab on your investments at all times.
Finally, if you are someone who has been investing in mutual funds in your heydays, financial analysts suggest you start a systematic withdrawal plan or SWP from your fund to ensure you get a regular monthly income for your future needs. To sum it up, even as MFs are market-linked, they are not as risky as made out to be, provided you do your own research and are clear about your needs. They can not only help grow your wealth by giving you risk-adjusted returns, but also make sure your sunset years are worry-free.
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