However, things have changed. ET.com Mutual Funds receive many messages on the Facebook page from young salaried employees every day. Most of these youngsters in their 20s either want a retirement plan or investment plan. Those who have already put in a retirement plan in place want to double-check whether they are on the right track.
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.
For example, look at the returns offered by various equity mutual funds over 10 years. Largecap mutual fund category has offered around 14.89 per cent; multicap category has returned around 17.52 per cent; midcap and smallcap categories offered a little over 20 per cent during the same 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.
Here are our recommendations for schemes in these categories: