What is the strategy that can help build a retirement fund?
Premium- Consider starting SIPs for retirement to create a reasonable corpus
My mother, who is 49 years old and currently unemployed, has received ₹2 lakh from her provident fund. We have invested this in a liquid fund. What should be our investment strategy to maximize gains, reduce taxes and build a good amount for her retirement? What are the different avenues of investment and allocation?
— Name withheld on request
If we consider retirement age at 55 or 60 years, you have time to invest the money in more aggressive avenues which can help you grow it better. So, your plan to increase the returns on this investment is correct.
Depending on your family’s near-term needs, you can invest this money later as your mother is presently searching for a job. If reasonable contingency funds are in place then you can start investing gradually. You can invest this money in equity mutual funds to accumulate a retirement corpus for your mother.
To create a good retirement corpus, you will have to invest more than ₹2 lakh. If we assume this ₹2 lakh investment grows at 10% per annum you will be able to accumulate around ₹5.70 lakh till her retirement.
This would be less to take care of regular expenses at that stage.
You may also consider starting SIPs for her retirement when she starts her work again to create a reasonable corpus.
You can invest in the following funds:
— UTI Nifty Index Fund – 25%
— Mirae Asset Large Cap Fund – 20%
— SBI Focused Equity Fund – 20%
— Canara Robeco Emerging Equities Fund – 20%
— UTI Flexicap Fund – 15%
Considering the present conditions, you can invest gradually instead of investing the entire amount in one go.
One way to do it is to invest 15-20% of ₹2 lakh as and when the stock market consolidates or simply opt for SIP in the above funds for six months and invest the amount.
Harshad Chetanwala is the co-founder at MyWealthGrowth.com.
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