Often people get so entangled in their job or business, children's education, house EMIs and daily expenses that they keep postponing retirement planning. But the truth is that the sooner retirement preparations are started, the more secure the future is. In today's time, relying only on pension, fixed deposit or rental income is not considered enough. For this reason, mutual funds are emerging as a strong option for retirement.
Retirement mutual funds are specifically created keeping the retirement goals in mind. These fall in the category of solution-oriented mutual funds, whose objective is to help investors create a good fund for retirement in the long run. In these funds, investments are made in both equity and debt, so that there is a balance between risk and return.
These funds usually have a lock-in period of five years, so that investors do not harm their retirement planning by withdrawing money in between. There are many funds available in this category in India, which offer options according to different ages and risk appetite.
When you invest in a retirement mutual fund, your money is invested in different assets by a professional fund manager. When the investor is young, more equity is kept in the fund so that it can get better returns in the long run. As retirement approaches, investments are gradually shifted towards safer options. In this way the fund adjusts itself according to different stages of your life, thereby reducing risk and keeping the capital safe.
The biggest advantage of these funds is diversification. Usually people invest money in PPF, FD or other saving schemes, but retirement mutual funds give you the benefits of both equity and debt together. This improves the chances of returns.
The second big advantage is flexibility. While the rules for withdrawing money in PPF or NPS are quite strict, retirement mutual funds offer relatively more flexibility. Many funds offer different plans, such as conservative, moderate and aggressive, so that investors can choose according to their age and risk appetite.
Retirement mutual funds can be a better option for those who want to invest for the long term and understand the ups and downs of the market. Employed people, freelancers and small business owners who want a stable income even after retirement can build a strong financial back-up through these.
Before investing in retirement mutual funds, consider your age, retirement goal, risk appetite and existing investments. By choosing the right fund, you can live a comfortable life without financial worries even after retirement.
