Hello Readers!

Most of the people in their 30’s or 40’s, start investing in Equity Mutual Funds, to build their retirement corpus, while some skip this. In their 30’s and ’40s, people are free from their big responsibilities and have high risk, so they prefer investing in Equity mutual funds for their retirement.

Thanks to medical science and their inventions, that has increased the average life expectancy of mankind. People generally when to plan for retirement they include a plan expenses for long 20-25 years after their retirement. They also include some fixed return investment after their retirement to fulfill these expenses, but on the contrary, sometimes it becomes difficult to carry their expenses with fixed return investment.

Thus, at this moment, the retirees looking for Equity Mutual fund investment. But the frequently asked question is, do equity mutual fund investments can have a place in their post-retirement portfolio?

After retirement, the regular income source that is monthly salary is stopped, thus people look more towards the safety of the capital. However, the volatility in equity investments in the short term can be harmful to the safety of capital.

Well, every Retiree is different. Whether Equity mutual fund is suitable for their post-retirement portfolio or not depends mainly on three points. Let us know about these:

ASSETS AND LIABILITIES, THEY HAVE 

If at the time of their retirement they are due with loan repayment, then their first priority is to clear the loan amount completely. More than that, if they get a good lump-sum when they retire, they can use it ideally, half of it to pay the loan amount, and a half they can invest in Equity Mutual funds.

They should check their asset allocation after they retire. If they have a house of their own, they are free from any kind of loan repayment and also, they have invested to carry their regular expenses, they can consider investing in Equity mutual funds after they retire.

YOUR DEPENDENTS

If after your retirement too, you have to carry the financial requirement of your children or maybe if you have responsibilities of your elderly parents, then its better to have low in equity mutual funds and high in fixed return instruments. Try to have a blend of fixed income assets for stable returns and some equity for high returns but remember equity should have lower allocation.

DO YOU GET A PENSION OR NOT? 

Many after their retirement get a monthly regular income that is a pension, but many don’t. If you also do not get any pension, then work out an annuity scheme that can help you generate regular monthly income. This can be done with a systematic redemption strategy around existing investments. After you reach an adequate regular income, then you can think of investing surpluses in equity.

Here I would also suggest that go slow with Equity mutual funds if you do get any pension or any kind of regular monthly income after your retirement. This is because equity mutual funds take a 5-7-year time period to grow and be able to deliver inflation plus returns.

However, if you do have a regular pension, you may be in a better position to begin a relatively larger allocation to equity.

Basically, if you want to include Equity mutual funds in your post-retirement portfolio, you need to assess your financial position post-retirement. The higher the value of assets you own and lower your liabilities plus if you are free from any kind of loan repayment, the more you will be able to allocate to equity.

For any kind of investment query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).