Best Mutual Fund Scheme for Retirement Planning!

Planning for your retirement!

The best retirement mutual funds are ones that are chosen because they meet your goals. 

Retirement planning involves the process of determining retirement income goals and deciding the necessary means to achieve those goals.

You have to know how much income you need and when you need it. If you've established your goals, next, look for funds with low expenses and determine what type of investment and withdrawal strategy you are going to use.

Retirement planning is essential if you are working in the private sector or self-employed.

Mutual Fund is one of the investment avenues that can beat inflation it is imperative that you make mutual funds the centerpiece of your retirement planning.

In straightforward terms, a open-end investment company  pools cash from completely different investors then invests that money in numerous equity stocks, debt and market instruments and within the end of the day, mutual funds provide glorious returns and facilitate build a corpus for your post-retirement desires.

The success of retirement plan depends on not only saving early but also on selecting the right kind of investment options to make your wealth grow.

Factors like risk appetite and investment time horizon play an important role in selecting appropriate investment option for retirement planning. The process of retirement planning includes identifying sources of income, estimating expenses, then selecting and implementing a saving and investment plan.

Investment options in mutual funds for retirement planning:

For the longest time most investors opt for a pension plan , investments like PPF, EPF, Tax-saver FDs, NSC and life insurance policies in retirement planning as they are safe in nature and provide added tax advantages.

That is also a good option but second to mutual funds as enables you to have equity exposure with more investment options and helps reduce the risk through diversification of the portfolio.

To maximise your gains in the long term mutual funds Equity Linked Savings Scheme (ELSS) have withstood the test of time and will help you to accumulate and grow your wealth in affordable manner.

Why invest in ELSS for retirement planning?

ELSS is not only a good investment option in terms of returns but also much suitable for tax-saving purposes. In the long run, equities as an asset class have outperformed all other investment options, which make ELSS have superior growth potential. If you consider the historical returns, ELSS has provided over 15% returns in a 10-year time frame which is exceptional across the categories.

While most products which qualify for tax deduction under section 80C have lower returns and higher lock-in period, ELSS provides relatively higher returns and lowest lock-in of 3 years.

Though there is a risk element with ELSS investment as it is a market linked instrument but the risk can be minimized by staying invested for a very long term. Since retirement is in general a 20 to 25 years goal, ELSS can definitely be one of the products in the portfolio of an investor willing to take low to moderate risk. 

Benefits of Investing in ELSS:

• Tax Efficiency: ELSS is relatively a tax-efficient product as not only investment upto Rs. 1.5 lakh per year is tax deductible u/s 80C but also long term capital gains upto Rs. 1 lakh in a year also tax exempted.
• Lowest Lock-in Period: Compared to other traditional tax saving investments, the 3 years lock-in period in ELSS is the lowest. Thus, investments in ELSS are more liquid when compared to other tax-saving instruments.
• Higher Returns Potential: As ELSS invests in equities the potential return from these investments can be much higher compared to other options in the long term.
• Easy and Flexible Investments: Investments in ELSS are convenient and extremely flexible. You can invest in ELSS in lump sum as well as by making contributions at regular intervals through Systematic Investment Plan(SIP). You can increase or decrease the amount of investment in your ELSS scheme as per your will. Though there is a minimum requirement of Rs 500 investment, there is no limit on the maximum amount you can invest in a tax saving ELSS fund. So in your initial years you can start with a lower amount and then as you grow in your career, you can start investing more when your income increases.
• Professional Fund Management: ELSS is managed by fund managers who have years of experience and expertise in selling and buying stock based on extensive research. They use the available funds optimally to ensure that the investments give the best possible returns to the investors. Thus, you will reap the benefits of best in class investments without having to do continuous research or monitoring.

ELSS Performance: A Comparative Analysis

Though ELSS has a lock-in period of 3 years, one should ideally look at these investments for long term.The short lock-in period just gives flexibility in case of an emergency.

One should not forget that the longer you stay with your investment, lower is the risk and higher are the returns. Since retirement planning is a long term investment plan, ELSS can be one of the best investments that you can go for. If you are risk-averse individual, you can always invest a part of your savings in ELSS and the rest with traditional mode of investments. With tax saving benefits and high return potential at very moderate risk, ELSS can be an ideal investment to consider for retirement planning.

You can use GIIS Financial tools or Our Android App  for Investment, tracking and Asset allocation planning. 

*Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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