The Mutual Fund Show: Dos And Don'ts Of Investing In A Retirement Fund
Investors can start small and automate transfers in retirement funds for consistent contribution, say analysts.
Retirement funds encourage consistent contribution and long-term investment strategies, according to Ajit Menon, chief executive officer of PGIM India Mutual Fund. "It nudges people to prioritise savings for retirement and reinforces commitment to achieving financial security."
Prableen Bajpai, founder at FinFix Research And Analytics Pvt., said that retirement is one of the most important goals for individuals today.
According to Bajpai, the top factors to consider while planning to invest in a retirement fund are:
Retirement age.
Current monthly expenditure.
Life expectancy.
Pre-retirement returns.
Post-retirement returns.
PGIM Retirement Fund gives 25% exposure to large, mid and small-cap stocks. It provides diversification across sectors, companies and themes, said Menon. "75% equity exposure aids long-term wealth generation," he said.
The PGIM Retirement Fund has a five-year lock-in period or till retirement age. "It reduces the occurrence of negative returns versus shorter period," he said.
Menon explains how the fund's lock-in period helps in:
Fostering long-term perspective.
Discouraging impulsive decisions and instilling confidence.
Setting up automatic contributions.
Avoiding frequent monitoring.
"Start small if necessary," advised Menon on retirement funds. "Automate contributions from salary and set up regular transfers from your bank account," he said.
In terms of valuations in small-cap and mid-cap schemes, Menon said, "Large inflows have contributed towards the rerating as well as strong earnings growth and a stable policy environment."
On the pros of investing in a PGIM Retirement Fund, Bajpai said, that it captures the idea of goal-based investing and brings in the requisite discipline. "It limits hasty withdrawals during market downturns and can be a choice for investors looking at child and retirement insurance plans," she said.
Query 1:
I have invested in eight mutual funds. They are Rs 2,000 per month in SBI Contra Growth Fund and Rs 1,500 per month in Mirae Asset Large and Midcap Fund via SIP. I make a lump sum investment of roughly Rs 35,000 in the remaining funds on a monthly basis, depending upon the market corrections. What's better, one-time investment or SIP? Are the funds in my portfolio good or do I need to change any?
Name: Dilip | Age: 34 years
Prableen Bajpai: Your portfolio is fine. No more schemes to be added. You can invest the whole lump sum in an SIP. It will give you great returns.
Query 2:
I invest Rs 5,000 via SIP in SBI Magnum, Nippon India large and small-cap funds, and ICICI Prudential Equity and Debt Fund. I wish to buy a house worth Rs 1 crore and am looking to develop a good portfolio in the next 3–5 years.
Name: Sai | Age: 31 years
Prableen Bajpai: He needs to increase his SIP. All the four funds, which he is investing in, are good and they can be continued.
