Mumbai, India, 14 August 2024-When we talk about retirement planning, mutual funds seem to be the most valid investment plans. With several investment options available in a lump sum or through SIP, mutual funds are the most favourable financial instruments. Moreover, learning how to invest in mutual funds helps cultivate a diverse portfolio with access to the stock market and the security of professional fund management. But what are the benefits of investing in mutual funds for retirement planning? Let’s discuss the details below.
Benefits of Retirement Planning With Mutual Funds
Let’s look into the benefits of investing in mutual funds for retirement planning:
- Less Risky: Mutual funds are less risky compared to direct investment since they invest in a diversified portfolio of stocks.
- Liquidity: MMost MFs don’t have a lock-in period and only have a brief exit load window. This makes withdrawals easy.
- Transparency: Mutual fund investments boast transparent and investor-friendly features. Asset Management Companies (AMCs) and Mutual Fund houses provide investors with regular reports to maintain transparency.
- Flexibility: While investing for your retirement, mutual funds allow you to be flexible with respect to your payout. Since there is no annuity involved, you can choose to withdrawn as and when you choose. For regular income, investors may choose the Systematic Withdrawal Plan (SWP) to regularly withdraw from their MF portfolio. Depending on your financial goals and requirements, you can opt to withdraw a lump sum or choose an SWP option for regular income.
- Tax Benefits: Only Equity Linked Saving Scheme (ELSS) Mutual fund contributions are eligible for tax deductions of up to ₹ 1.5 Lakh under Section 80CCC of the Income Tax Act. However, the fund withdrawals are subject to taxation.
- Appropriate for Long-Term Investing: Mutual funds are suitable for long-term investing. The longer you stay invested, the more stable the That is why mutual fund investment is an excellent long-term investment plan offering financial stability after retirement.
- Edge Against Inflation: Mutual funds offer an edge against inflation by investing in diverse assets, potentially yielding higher returns than traditional savings accounts, thus preserving and growing your purchasing power over time.
- Financial Security: Investors can choose all types of mutual funds, ranging from equity to debt and hybrid options. Investors with low-risk appetites can align their portfolio such that volatility is minimized. Over a long term, equity has proven to given inflation adjusted returns.
Choosing the Best Mutual Fund for Retirement Planning
Before investing, you must research a mutual fund scheme most suitable for your needs. Here are a few important things to keep in mind:
- Fund Objective: Based on your goals, you may invest in different types of mutual funds, including equity, debt, hybrid, and value funds. With so many options available for investing, you may diversify your investment and achieve the desired capital growth.
- Long-Term Performance: Before investing in a mutual fund, check its long-term performance and understand how it has performed during market downturns. This will help you understand it’s risk adjusted return.
- Risk Tolerance: As investors, you must determine your risk level and choose an appropriate mutual fund scheme.
- Fees and Charges: Before purchasing a scheme, compare its exit loads, redemption fees, management fees, etc.
Modes of Investment in a Mutual Fund
You can invest in a mutual fund in two ways: as a single lump sum investment or in instalments through an SIP plan. SIPs allow you to invest fixed amounts of money in a fund at specified intervals, like monthly, quarterly, and yearly for a defined period of time. Example, an SIP of INR 10,000, every month for the next 5 years.
Mutual funds are one of the best options to plan your retirement. They allow you to create a retirement corpus in an easy and manageable way. Learn how to invest in mutual funds and start at the earliest to give your money the maximum time to grow. Also, consider factors like your retirement goals, investment horizon, risk appetite, etc., before choosing a mutual fund for investment.
Media info:
Name: Kotak Mahindra Bank
Organization: Kotak Mahindra Bank
Website: https://www.kotak.com/
Email: info@kotak.com
Address: Kotak Mahindra Bank, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra 400051
