Retirement Planning With Mutual Fund Investments

A 26-year-old person speaking about planning for retirement would have been unimaginable a decade ago. Of course, some yuppies, influenced by foreign magazine covers, used to speak about retiring at 30. But a typical individual would start thinking about retirement in his late 30s or 40s. 

Well, it is understandable that people are worried about their retirement. They indeed should be. One, most individuals do not have a company-sponsored pension that would take care of their living expenses after the retirement. Two, they cannot turn to their families or kids for help like the old days. Three, people are living longer – that means you need a larger nest egg to take care of your sunset lives. 

So, how do you start planning for it? Well, it is simple: just start investing a small sum regularly in an equity mutual fund. Countless studies have proven that investing a small sum regularly over a long period in an equity scheme is the only way to create wealth over a long period. Only equities have the potential to offer inflation-beating better post-tax returns over a long period. 

Remember, it is extremely important to earn well above the inflation rate. Otherwise, the value of your corpus will get eroded with passing years. You might end up with a small corpus that would not be enough to take care of your retired life. 

Now, coming back to mutual funds, all you have to do is to choose a mutual fund that is in line with your risk profile. For example, if you are a conservative equity investor who doesn’t like much risk, you should choose a largecap equity mutual funds to create your retirement corpus. If you are a moderate risk-taker, you should choose multicap schemes. Aggressive investors can choose midcap and smallcap schemes to create their retirement fund. 

Choose a mutual fund scheme with a consistent performance record and invest regularly via Systematic Investment Plan (SIP). Do not let the short-term negative trends in the market influence you and continue with your investments. Keep track of the performance of your schemes and review your mutual fund portfolio at least once a year. These steps would ensure you a rich retired life.