Latest news with #Thakurta
Economic Times
29-07-2025
- Business
- Economic Times
NPS equity funds see low single-digit returns in 1 year. Is it time to review your retirement strategy?
National Pension System equity funds show low returns this past year. Experts blame market conditions and NPS structure. NPS equity funds have delivered low single-digit returns over the past year and according to market experts, this underperformance can be attributed to the current neutral market phase impacted by geopolitical tensions, as well as the structural limitations of the NPS framework. 'The market right now is in a neutral phase, impacted by geopolitical crisis, US tariff expectations and weak earnings in key sectors such as IT and financials, both of which form a significant portion of NPS equity portfolios. Another thing to keep in mind is the structure of NPS itself,' Arjun Guha Thakurta, Executive Director at Anand Rathi Wealth Limited shared with ETMutualFunds. Also Read | Smallcap mutual funds dominate return charts in 5 & 10 years. What's driving the surge? According to the structure of NPS, about 20-25% of the portfolio is mandatorily in debt, which typically won't go beyond 7–8% returns therefore, the real growth engine is the 50-75% in equity, and that's been playing around market volatility lately. 'Also, since most NPS equity funds invest heavily in large caps, nearly 70% of the portfolio, they miss out on the higher growth potential that mid and small caps have delivered over time. Together, these factors have resulted in lower returns,' he added. Out of 10 NPS fund managers, nine have offered upto single-digit returns, one delivered negative return in the same period, according to data provided to ET by Value Research. DSP Pension Fund, relatively a new entrant, has offered the highest return of around 8.90% in the last one year. Kotak Pension Fund offered a return of 3.90% in the last one year period. Three fund managers - HDFC Pension Fund, ICICI Prudential Pension Fund, and UTI Pension Fund offered 2.52%, 2.22%, and 2.17% returns respectively in the said time period. LIC Pension Fund and ABSL Pension Scheme offered 1.88% and 1.39% returns respectively in the last one year. Axis Pension Fund and Tata Pension Management offered 0.93% and 0.83% returns respectively in the said period. And lastly, SBI Pension Fund offered a negative return of 1.15% in the said period. Post looking at the performance of NPS equity funds, should one consider rebalancing their asset allocation and what is the ideal time to hold onto equity investments in NPS to potentially see meaningful growth, Thakurta recommends that a better approach is to manage the overall allocation at a portfolio level as this allows an investor to align their equity and debt exposure with your goals, investment horizon and risk appetite more further adds that NPS can be compared to a hybrid fund with a lock in, where you don't have full control over asset allocation along with compromised liquidity. In NPS, the subscriber is required to decide investment choice whether active choice or auto choice. In active choice, a subscriber has the right to actively decide as to how the contribution is to be invested based on their personal preference. In this, subscribers can select multiple asset classes under a single pension fund manager. Upto 50 years of age, the maximum permitted equity investment is 75% of the total asset allocation. From 51 years and above, maximum permitted equity iInvestment differs. Percentage contribution value cannot exceed 5% for Alternative Investment Funds. The total allocation across equity and related instruments, corporate debt and related instruments, government bonds and related instruments and alternative investment funds including instruments like CMBS, MBS, REITS, AIFs, Invlts etc asset classes must be equal to 100%On the other hand, in auto choice, the investments will be made in a life-cycle fund and the proportion of funds invested across three asset classes will be determined by a pre-defined portfolio. Also Read | Consistent performers: Over 40 equity mutual funds offer over 15% CAGR in 3, 5, 7 and 10 year horizons NPS is focused on saving for retirement whereas mutual funds help investors to plan for different financial goals. The NPS scheme has a certain maturity period of 60 years and withdrawal restrictions. Mutual funds offer a lot more flexibility and ELSS mutual funds come with a three-year lock-in. These funds have a minimum lock-in period amongst various tax saving options available under Section other retirement savings options are also available, Thakurta advices investors to definitely consider other options as it's better to control their asset allocation at a portfolio level, where they can divide their money into three baskets, with a mix of equity and debt as they have a low correlation with each other. For equity, investors can consider equity mutual funds from diversified categories and for the long-term basket, meant for retirement, can have an 80:20 mix of equity and debt, the expert further adds that the medium-term basket, for the longer-term needs, can be 70:30 in equity and debt and the short-term basket should be fully in debt, meant for any near-term expenses as this way, one gets the flexibility to manage short-term liquidity while also generating wealth over the long term through the power of is a market-linked defined contribution scheme that helps you save for your retirement. The scheme is simple, voluntary, portable and flexible. It is one of the most efficient ways of boosting your retirement income and saving tax. It allows you to plan for a financially secure retirement with systematic savings in a planned way, according to the NPS Trust at how the macro environment is evolving, with GDP growth at 6.5% for FY25 and projected to rise to 6.6% next year, inflation well under control, and strong tax collections, it is clear that the market is on a healthy growth path and in this context, NPS may not be the most efficient vehicle to benefit from this momentum, Thakurta mentioned. He further informs that most NPS equity funds tend to stick to large cap allocations and have a fixed structure, which limits flexibility and the ability to optimise returns and there is also the lock-in until retirement and the compulsory annuity purchase, which can restrict an investor's options. 'Mutual funds, in contrast, offer liquidity, a wide choice of categories and the flexibility to adapt to changing market cycles. For long-term investors, mutual funds are better suited to help generate wealth over the long term,' he added. (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.
Time of India
15-07-2025
- Business
- Time of India
Nearly Rs 81,000 crore pulled from liquid, overnight MFs. Time for a portfolio check?
Amid rising outflows from liquid and overnight funds, experts recommend ultra-short-term funds for up to 6 months and arbitrage funds for longer horizons due to better return potential and tax efficiency. While concerns about returns persist due to rate cuts, liquidity remains strong. Investors are advised to choose based on their goals, horizon, and risk appetite. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Mutual fund investors have realigned their short-term investments, pulling money out of liquid and overnight funds amid changing preferences. These two categories together witnessed an outflow of more than Rs 81,000 crore in May and to monthly data released by the Association of Mutual Funds in India (AMFI), liquid funds saw an outflow of Rs 16,274 crore, while overnight funds recorded an outflow of Rs 65,401 crore over the last two Read | Investors pump over Rs 30,000 crore in flexi-cap mutual funds in H1 CY2025. Is all-cap exposure a new favourite? On the contrary, money market funds have been receiving significant inflows. According to the data, money market funds recorded the second-highest inflows over the last three months—April, May, and June—among the 16 sub-categories within debt mutual experts believe this reversal is primarily driven by seasonal factors, as many corporates and institutions use these categories to park short-term surplus funds. However, by June, this money tends to flow out due to advance tax payments and quarter-end balance sheet adjustments.'Additionally, with a series of interest rate cuts, yields in short-duration categories like overnight and liquid funds have flattened. As a result, investors have begun reallocating capital toward slightly higher-duration categories such as money market and ultra-short duration funds, which offer better accrual potential in the current interest rate environment,' Arjun Guha Thakurta, Executive Director, Anand Rathi Wealth Limited, told ETMutualFunds.'In the past two months, we've also seen a reversal in equity markets, which may have further triggered outflows from retail investors as part of portfolio reallocation,' he April, money market funds received inflows of Rs 31,507 crore, followed by Rs 11,223 crore in May, and Rs 9,484 crore in generally consider overnight and liquid funds as options for parking idle savings outside the banking system. For a savings account alternative, safety and liquidity must take priority—and liquid and overnight funds come closest to meeting these this context, the key question is: should one review their emergency fund parked in liquid or overnight funds? Addressing this, Thakurta advises that investors need not worry about recent outflows, as they are largely driven by institutional activity and seasonal factors—not by any structural concerns. Liquid and overnight funds invest in highly liquid instruments such as treasury bills, call money, and other short-term government-backed securities, which carry zero credit risk and offer fixed, predictable Read | Nearly 112 lakh SIPs closed in 2025: Should you worry about the negative net SIP trend? Commenting on better alternatives to park short-term surplus money right now, the expert said it's about being selective. 'If your investment horizon is up to 1–6 months, ultra short-term duration funds are ideal. For a horizon of 6 months to 1 year, arbitrage funds work well, as they offer better potential without a significant increase in volatility,' Thakurta at the monthly returns, liquid funds delivered an average absolute return of 0.53% in May and 0.49% in June. Overnight funds gave average returns of 0.46% in May and 0.41% in comparison, money market funds posted higher average returns—0.66% in May and 0.61% in the case of liquid and overnight funds, if an investor redeems money on a Friday, they receive the amount on Monday, but the net asset value (NAV) applicable will be that of Sunday. This is because NAVs for these funds are declared for every day, including weekends and continued outflows from these two categories, some investors are concerned about the potential impact on returns or liquidity. Addressing this, Thakurta said returns might remain slightly muted in the near term—especially for overnight and liquid funds—due to the series of interest rate cuts. However, there are no liquidity concerns.'Liquid and overnight funds can comfortably handle large inflows and outflows as they invest in highly liquid instruments like treasury bills and call money. Even with recent outflows, these funds remain robust and well-positioned to meet redemptions without stress,' he May, corporate bond funds received the highest inflows among the 16 sub-categories, amounting to Rs 11,983 crore. In June, short-duration funds topped the chart with inflows of Rs 10,276 these categories gain traction and receive the highest inflows, the question arises: are corporate bond and short-duration funds more suitable in the current environment compared to liquid and overnight funds?Also Read | Mutual funds slashes cash allocation by Rs 13,000 crore in June; PPFAS and Quant MF join trend The expert said it depends on the investment horizon. If you're looking to park funds for up to 6 months, ultra-short-term duration funds are ideal. However, if your time frame is beyond 6 months, arbitrage funds can be a wise choice, as they offer tax advantages along with better return potential and low to SEBI's mandate, overnight funds invest in overnight securities with a maturity of one day, while liquid funds invest in debt and money market securities with a maturity of up to 91 days. In contrast, money market funds invest in money market instruments with a maturity of up to one should always invest based on their risk appetite, investment horizon, and financial goals.(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 ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ along with your age, risk profile, and Twitter handle.
Time of India
27-06-2025
- Business
- Time of India
MNC mutual funds struggle to perform, lose 3% in 1 year. What's driving the underperformance?
Live Events With MNC theme based mutual funds losing out an average of around 2.94% in the last one year, a market expert mentions that as MNC funds have heavily invested in the underperforming sectors, their overall returns have naturally been impacted.'Over the past year, MNC funds have delivered returns much below their benchmarks. The Nifty MNC index has itself seen low returns. MNC funds invest mostly in companies that are part of the Nifty MNC index. This index is heavily weighted in two main sectors: FMCG at 35.13% and Capital Goods at 23.80%. Both these sectors have not done well over the past year,' Arjun Guha Thakurta, Executive Director, Anand Rathi Wealth Limited shared with to Thakurta, the Nifty FMCG Index, which fell nearly 3% over the past year, includes a 2.06% drop from April to May and a further 0.3% decline from May to June. Similarly, the S&P BSE Capital Goods Index fell around 2% in the past year and dropped 0.2% from May to June. Nifty India Manufacturing Index, which also reflects capital goods and industrial exposure, declined by nearly 5% over the last year and with MNC funds heavily invested in these underperforming sectors, their overall returns have naturally been impacted, Thakurta further adds that the MNC funds are also restricted to a relatively small universe of MNCs listed in India, which limits diversification and can lead to underperformance if the broader market rallies but MNC stocks do funds were the second biggest losing category in the said period after auto sector based funds lost 7.15% on an average in the same period. There were around five schemes in the MNC category that completed one year in the MNC Fund lost the most at around 9.75% in the last one year, followed by UTI MNC Fund which lost 2.68% in the said period. Aditya Birla Sun Life MNC Fund lost 1.65% in the mentioned lastly, SBI Magnum Global Fund and ICICI Prudential MNC Fund lost 0.59% and 0.04% respectively in the same time comparing the performance of MNC funds with that of Nifty50 where Nifty MNC has failed to beat Nifty 50 in 3 out of the past 5 years, and is lagging behind this year as well, Thakurta advises investors not to invest solely in any single sector, as it increases the concentration further advises investors to invest in broad based diversified equity funds such as market cap based funds and strategy based funds which gives exposure across the sectors, categories and market caps & helps to reduce the concentration risk associated with performance of any single sector and additionally strategy based diversification helps to ride across the market funds are benchmarked against NIFTY MNC - TRI which went down by 4.28% in the last one year. In the last three years, MNC based funds gave double-digit returns upto 17% with ICICI Prudential MNC Fund being the topper and SBI Magnum Global Fund offering the lowest return of around 13.36% returnA similar picture was seen in the returns offered by these schemes in the last five years. On the other hand, in the last three months, only two funds gave double-digit returns. Aditya Birla Sun Life MNC Fund and Kotak MNC Fund gave 12.24% and 10.68% returns respectively in the last three months. ICICI Prudential MNC Fund gave the lowest return of 5.96% in the last three observing the recent trends or returns offered by these funds, Thakurta said that the outlook for MNC funds remains cautious and while these funds appear to offer steady, long-term returns due to the strength of multinational companies, historical data suggests that strong outperformance is unlikely in the near term unless MNC stocks come back into favor or global conditions further added that even if these positive shifts occur, the performance of MNC funds is expected to remain cyclical rather than consistently strong and such funds are riskier than diversified funds due to their concentrated exposure therefore, investors are advised to avoid investing in a single sector and should opt for more diversified funds which invest across multiple sectors and market considered all MNC theme based funds. We considered regular and growth options only. One should always make investment decisions based on their risk appetite, investment horizon, and goals.: 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.
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.
Time of India
15-06-2025
- Business
- Time of India
Father's Day 2025: How to ensure financial security for your father
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 day. ETMutualFunds reached out to an expert to understand how to build the portfolio allocation and plan financial security for the fathers. Also Read | Explained: What all Gen-Z should know about mutual funds Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Don't Miss The Top Packaging Trends Of 2024, Enhnace Your Brand With The Latest Insights Packaging Machines | Search Ads Search Now Undo Approaching retirement 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 sufficient. An 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 costs. Live Events Arjun 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 retirement. While 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 assets. Thirdly, 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 needs. Many 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 objective. Also 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 accordingly. For 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 inflation. Secondly, 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 stress. There 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 goals. For 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 tenure. But 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 regime. There 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 adviced. He 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 ETMutualFuds. Also 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 term. Once 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 life. For young fathers For 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 SIPs. Thakurta 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 sectors. Additionally, 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 added. Early planning One 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 mentioned. For 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 years. Also 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 grow. Lastly, 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 growing. The 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 quickly. He 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.
