The Economic Times
English EditionEnglish Editionहिन्दी
| E-Paper
Search
+

    Best mutual funds for retirement

    Synopsis

    If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

    Getty Images
    I am looking for investment advice. I am 38 years old and want to start investing for retirement. I am planning to invest Rs 10-15,000 per month in mutual funds.
    I have started SIPs in:
    Parag Parikh Long Term Equity Fund (Rs 2,000),
    Canara Robeco Emerging Equities Fund (Rs 1,000), and
    Bharat Bond FOF - April 2030 (Rs 1,000).
    Please suggest more funds that I can invest to build wealth for retirement by 2035.
    -Srinivas Reddy

    You should always calculate a target corpus when it comes to planning for long-term goals like retirement. Preferably, you should include inflation and taxes in the calculation. For retirement, you can take the current living expense and provide for annual inflation of 6 or 7%, to reach a realistic target.
    For example, if your current monthly living expense is Rs 50,000, it means you need Rs 6 lakh per year to take care of your living expenses. At an annual inflation of 6%, your living expense would be Rs 14.38 lakh after 15 years.

    If you live for another 20 years, you would need a corpus of around Rs 2.88 crore (Rs 14.38 x 20).
    Note, we are keeping the calculation simple and assuming that you are earning enough to nullify the impact of inflation on the corpus after retirement. Also, we have only taken living expenses in this calculation. If you want world tours and vacations, you should do those calculations separately.
    Things You should consider
    • Annualized Return
      for 6 month: 5.38%
    • Suggested Investment
      Horizon: >3 years
    • Time taken to double
      money: N.A
    Things You should consider
    • Annualized Return
      for 3 year: 14.5%
    • Suggested Investment
      Horizon: >3 years
    • Time taken to double
      money: 4.10 Years

    Coming back to retirement planning, once you know the target corpus, you can calculate how much you need to invest every month to build it.

    In this case, you need to invest around Rs 57,000 every month and earn an annual return of 12% to build the target corpus of Rs 2.88 crore in 15 years or by 2035.

    Now that you are aware of the amount you need to invest, you can proceed to choose your mutual funds wisely.

    If you are a conservative investor looking to build a corpus without much risk, you should stick to bank deposits and debt mutual funds. However, these avenues offer modest returns and fail to beat inflation, you will have to invest a very large amount every month to build your desired corpus.

    But if you are ready to take risk, you may consider investing in equity mutual funds. Choose an equity mutual fund category that matches your risk profile. Since you have not shared your risk profile, it is not possible to suggest a mutual fund category for you.

    If you are a conservative `equity’ investor, you should stick to large cap mutual funds. If you have a high risk appetite, you may consider investing in a large & mid cap scheme, mid cap scheme, small cap scheme, etc.

    Note that you should not choose mutual fund schemes based on their recent performance. Also remember that you do not need more than two or three schemes in your portfolio when you are investing a modest sum. Do not add too many schemes because it will be difficult to monitor the portfolio. Also, investing whatever you are left with at the end of the month or a random amount will not help you to achieve your various financial goals. You need to know your target to reach your goals. Similarly, you should also invest adequate amount to achieve the goal.

    Lastly, if you do not understand much about mutual funds, seek the help of a mutual fund advisor. Invest for a while and learn about mutual funds before trying to invest on your own. Do not expose your money to unwanted risk and lose an opportunity to create wealth.
    (If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)
    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Also Read

    3 Comments on this Story

    Rajiv Deshmukh39 days ago
    What kind of advise it this? Are you giving a training or advise? Very genearal answer.
    43 days ago
    Invest in : NIFTY BEES 50% , NIFTY BANK BEES 35%, NIFTY NEXT 50 15% of your investment ..........
    D D KORANNE
    Niket Shah44 days ago
    The whole block is just all about roaming around Bush, it states nothing concrete and nothing substantial. Such advise even a layman can give with having bit of an insight to market. Thoroughly disappointed with content.
    The Economic Times