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Economic Times
15-06-2025
- Business
- Economic Times
Father's Day 2025: How to ensure financial security for your father
Tired of too many ads? Remove Ads Approaching retirement Tired of too many ads? Remove Ads Popular in MF 1. HDFC Defence Fund adds Bharat Forge and Bharat Dynamics in its portfolio in May Tired of too many ads? Remove Ads For young fathers Early planning As Father's Day is celebrated today, it's the perfect occasion to move beyond traditional gifts and give your dad something truly meaningful—financial security. While traditional gifts are great gestures, helping your father plan for or strengthen his retirement can offer peace of mind that lasts far beyond this one reached out to an expert to understand how to build the portfolio allocation and plan financial security for the Read | Explained: What all Gen-Z should know about mutual funds Retirement, after all, is a stage of life that demands smart financial planning . Many from the older generation have long relied on fixed deposits and similar instruments for post-retirement income. But with inflation eating into post-tax returns, such traditional savings avenues may no longer be expert highlights that planning for retirement is crucial because, after a certain age, regular income stops, but expenses continue, often increasing due to inflation and healthcare Guha Thakurta, Executive Director at Anand Rathi Wealth Limited shares four steps to ensure financial security post retirement and the mistakes one should avoid post sharing the steps to ensure financial security, the expert mentions that an investor should reassess his after-retirement financial goals and expenses for example household needs, healthcare, travel or support for family. Secondly, investors should have a plan for accumulated wealth to be invested in income generating and capital preservating keep a separate fund for 6 to 12 months of expenses in a safe option like liquid fund or savings account as this helps to handle unexpected costs without disturbing the main investments. And lastly, one should keep checking their financial plan every year or after any major change in your life as this will help you to stay aligned with your goals and adjust to new investors look for the best or top mutual funds to invest without considering their risk appetite, investment horizon, and goals which often results in loss of capital, underperformance in the portfolio, or unfulfilment of main Read | ITC and BSE among stocks that mutual fund bought and sold in May Thakurta shares the mistakes that one should avoid while planning post 60 which includes planning with today's value of money can be misleading as inflation eats into your savings over time, so always adjust your goals example, if a person wants to retire today with Rs 2 crore it will not be the same amount after 30 years as inflation will have a greater role to play. The target amount changes to Rs 11 crore post adjusted of it is not recommended to put all your money in one place as one should invest in assets with low correlation to beat inflation and can construct the portfolio in a manner which is proper debt to equity mix to beat inflation while keeping risk low. And lastly, medical expenses can rise quickly in old age so having good health insurance and a separate medical fund is a must to avoid financial are many investment options available to make investments but an investor should always choose the correct avenue based on their risk appetite, investment horizon, and fathers looking for stable income and capital safety, the expert shares that there are several reliable investment options such as bank fixed deposits (FDs) remain a popular choice, especially among retirees, as they provide assured returns and flexibility in FD returns may not always beat inflation so another option for senior citizens is the Senior Citizen Saving Scheme (SCSS), a government-backed plan designed specifically for individuals above 60 which offers attractive interest rates, quarterly payouts, and tax benefits under Section 80C in old tax regime but not suitable for an individual opting for New Tax are annuity plans offered by insurance companies for retirement planning and such insurance plans come with a lock in period and usually fail to deliver inflation-beating returns so the investor should not look at insurance as an investment product and should go for the term plan, the expert further adds that investing in pure debt mutual funds for retirement may seem like a safe choice, they don't usually deliver high returns, and hence are less effective for long-term wealth creation and more importantly, after the recent tax changes, debt mutual funds are no longer eligible for indexation benefits. 'Now, gains are taxed as short-term capital gains at your slab rate, regardless of holding period. This reduces their post-tax efficiency, especially for retirees in higher tax brackets,' Thakurta shared with Read | HDFC Defence Fund adds Bharat Forge and Bharat Dynamics in its portfolio in May Investment in equity mutual funds through SIP and SWP The expert believes that investing in equity mutual funds through SIP (Systematic Investment Plan) is a smart way to build wealth for retirement as SIPs allow you to invest small amounts regularly in mutual funds that invest in stocks, which can potentially offer annual returns of 13 to 14% over the long you have built a sizable corpus, you can switch to an SWP (Systematic Withdrawal Plan) to withdraw a fixed amount every month as retirement income and this approach helps provide regular cash flow while the remaining corpus continues to grow, Thakurta said.'Retirement planning is a long term journey and choosing diversified equity mutual funds for retirement planning is ideal, as they help to beat inflation and generate long-term wealth and can be a powerful vehicle to help you retire rich.'This is where mutual funds can play a powerful role. They offer the flexibility and diversity needed to manage money effectively at every stage of younger fathers who are still working and have several years before retirement, equity mutual funds are a smarter long-term choice. They invest in stocks and aim to deliver inflation-beating returns over time, making them suitable for wealth creation through consistent investments like advocates equity mutual funds as it can be a powerful tool for long-term wealth creation as they provide diversification and flexibility, which reduces investor risk by providing them the ability to invest across multiple market caps and investors get the benefit of compounding which amplifies the wealth generation process over a longer period of time and equity mutual funds have historically delivered inflation-beating returns of 11-13% over long periods, making them one of the best tools for building a retirement corpus, he of the most effective ways to accumulate wealth for retirement is through a Systematic Investment Plan (SIP) as SIPs allow investors to contribute a fixed amount at regular intervals, ensuring disciplined investing and reducing market timing risks and over the long run, SIP strategy smooths out market volatility, making SIPs an ideal choice for retirement planning, the expert Example, if one starts SIP of Rs 25,000 with an annual step up of 10% for their father when he is of age 40 years, you would accumulate Rs 5 crore when he reaches at the age of 60 Read | NFO Insight: Baroda BNP Paribas Health and Wellness Fund opens. Is it the right prescription for your portfolio? For fathers who have already retired and rely on their savings for monthly expenses, consider suggesting a Systematic Withdrawal Plan (SWP) as this allows your dad to invest a portion of his retirement savings in a mutual fund and withdraw a fixed amount at regular intervals and it not only ensures steady income but also allows the remaining corpus to stay invested and potentially Thakurta shared a SWP plan for retirement as an SWP allows you to withdraw a fixed amount from your mutual fund investment regularly, making it a useful tool for monthly income after retirement and the remaining money stays invested and keeps expert also advised to start with a safe withdrawal rate, like 5 to 6 percent, to make your savings last longer as it's flexible and helps manage expenses without depleting your corpus too shared that if an investor invested a corpus of Rs 1 crore at age 60 and expected a monthly cash flow of Rs 50,000 per month from his investment account then an investor with an asset allocation of 70:30 in equity and debt can end up with corpus of Rs 3 crore with a 4% starting withdrawal rate and a 5% incremental withdrawal rate while ensuring the ease of liquidity in the portfolio.
Economic Times
11-05-2025
- Business
- Economic Times
Mother's Day Special: How to secure her future with smart financial planning
As we honour mothers' strength, resilience, and sacrifices this Mother's Day, there's no better way to celebrate than by helping them secure their future with smart financial planning. Whether it's a young mother planning for her child's future or a retired mother seeking stability and income, smart financial planning plays a pivotal contacted two experts to learn how to build the portfolio allocation and plan financial security for the mothers. Also Read | Mutual fund SIP stoppage ratio shoots up to nearly 300% in April; fewer takers amid market volatility While planning the financial security for your mother, building a portfolio allocation plays a very important role. According to Bharti Sawant, Fund Manager at Mirae Asset Investment Managers (India), every mother should begin with setting up an emergency fund covering 3–6 months of expenses and this should form around 10–20% of the overall portfolio and for long-term growth, stocks and mutual funds are key, ideally constituting 40–70% depending on age and investment horizon. 'If the horizon is longer, for instance, 10+ years, they must prioritize pure equity funds. As age advances, gradually shift to hybrid funds, a blend of equity and bonds, gradually in order to mitigate risk. To inject stability, one can think of 'debt funds,' which provide steady income and lesser volatility, constituting 20-30% of the portfolio, particularly if the risk tolerance is low. Eventually, have a suitable Insurance cover for life and health. Insurance is not an investment but is crucial from the perspective of financial protection,' she added. Another expert believes that with changing times, more mothers are becoming financially aware and understanding the importance of investing to grow their wealth and achieve long-term financial independence and every mother has diverse goals, ranging from funding their children's education to pursuing personal aspirations like starting a business, depending on the phase of life they are in. However, what remains constant for all mothers is the need for financial planning and disciplined investing to achieve these goals, he adds.A young mother might have a long term horizon in order to create a corpus for her child's education. In another case, a mother with an older child might be saving to Guha Thakurta, Executive Director, Anand Rathi Wealth suggests that if one has short term goals then an allocation of 100% in debt would be the ideal allocation but someone with a medium term goal can have 60:40 ratio in equity and debt. However, a mother with a long-term goal can have an 80:20 ratio in equity and debt, he sharing the key strategy to build a good portfolio, Thakurta advices every investor including mothers to have a well-diversified portfolio and having products that have low correlation with each other and the best option is to opt for equity and debt as the two asset classes.'When investing in Equity, Equity Mutual Funds are a better option than Stocks as that provides the benefit of professional management and diversification. When investing in debt, if you are in the highest tax bracket, explore arbitrage funds that provide debt-like returns with equity-like taxation,' he advised. Also Read | Gold ETF record outflow for second consecutive month amid surge in prices. Is it profit booking? For mothers looking to balance growth and risk, mutual funds offer tailored solutions. Bharti Sawant recommends that if looking for long-term wealth creation, active equity funds are excellent, if for cost-effective and diversified market exposure then index funds serve the purpose. 'If you are looking to achieve a balanced approach to growth and stability, Hybrid/Balanced Funds combine stocks and bonds, offering potential returns while managing risk and in addition, 'debt funds' are also suitable for those who desire conservative investments, offering stability and regular income. Combining these categories can allow mothers to build a strong and growth-oriented financial portfolio while balancing risk, Sawant recommends. Thakurta while sharing that ultimately, it is important to maintain a diversified and goal-aligned mix of funds while regularly reviewing and rebalancing to stay on track with long-term financial objectives advices that one should invest across diversified categories, AMCs, and investment styles to avoid concentration risk. He emphasizes constructing a balanced mix of large, mid, and small cap funds (55:23:22) along with different styles like growth and value strategies, ensures resilience across market cycles and for broader diversification, investors can look into flexi cap and multi cap are several mothers who are either retired or are approaching retirement and there are young mothers as well. By sharing the two investment baskets required in one's portfolio, Thakurta mentions that one should structure her investments in for her emergency and immediate needs and another for long - term financial these two investment baskets, the long-term basket should focus on capital preservation and generating sustainable income and it's also important to define the purpose of this corpus like whether it will support her post-retirement lifestyle or be passed on to her children as a legacy, the experts recommending a strategy for 60-year old mothers, Thakurta said that an ideal SWP strategy for a 60-year-old with Rs 1 crore, can start with Rs 50,000 monthly withdrawals, increasing 5% each year to match inflation and with a 70:30 equity-debt mix and 11.4% annual growth, the investor could still end up with Rs 3 crore at age 85, ensuring steady income and long-term growth. Also Read | Small & mid cap MF inflows dip marginally, both attract over Rs 3,000 crore in April On the other hand, Sawant shares that the investment priorities changes for those mothers who are retired or are approaching retirement are different for a young advices that for those mothers who have retired or approaching retirement, the priorities must shift toward ensuring financial security and regular income and investment priorities should gravitate toward low-risk avenues like debt funds, income-generating tools like annuities or dividend-yielding funds and shares as these are less uncertain and capital-conserving in the returns that they young mothers have a longer horizon of investment and can tolerate a higher risk expecting better returns in the future and they ought to have a larger weightage of their portfolio in equity schemes to benefit from long-term gains, she the experts are of the view that it is also important that they review and rebalance their portfolio from time to time if their risk-taking capacity or situation in life is altered. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
