• 16th June 2024

How Can Investing in Mutual Funds Help You Plan Your Retirement Better?

You should not delay planning for your retirement, as it can result in financial difficulties during your senior years. You will need to build a sizable corpus to ensure monetary independence via a regular income after you retire.

You can invest in different products like pension plans, retirement plans, fixed deposits, and others. However, before you make an investment decision, ensure the expected returns are higher than inflation.

Mutual funds (MFs) are one option that delivers inflation-beating returns over the long term. You can choose from different types of schemes based on your goals and risk appetite. MFs enable you to invest in equities; however, the diversification across multiple stocks mitigates the investment risk.

If you have an investment horizon between 20 to 30 years, a Systematic Investment Plan (SIP) has multiple benefits. It allows you to invest a pre-determined amount at periodic intervals to grow your wealth over the years. You can invest any amount based on your cash flows. Moreover, by investing in an SIP you can switch between different schemes with the help of a systematic transfer plan. This can reduce your risks as you grow older. Investing in certain types of schemes enable you to avail of tax benefit according to Section 80C of the Income Tax Act, 1961. You can use an SIP calculator to ascertain the amount you will have to save to build the desired retirement corpus.

You may prefer to invest in pension funds to receive a regular income post-retirement. However, MFs offer higher returns in the long run. Here are three advantages of investing in MFs for your retirement:

  1. Versatility

Compared to pension plans and deposits, mutual funds in India are more flexible. There are no limitations on the partial or complete withdrawal of funds. You can also discontinue your investment and shift it to another scheme.

  1. Transparency

All information related to your MF investments is easily available. You can review the asset allocation, net asset value, total assets under management (AUM), fund manager, and other details related to your investments on the companies’ websites.

  1. Tax-efficiency

Most pension fund earnings get added to your income, and you need to pay a tax as per your income tax slab. However, long-term capital gains on your equity fund investments are tax-free up to INR 1 lakh. The gains earned on debt funds enjoy indexation benefits, which decreases the applicable tax.

As you may have understood the plus points of investing in mutual funds online, visit the Mahindra Finance website and commence your investment journey.

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