Friday, January 5, 2018

Securing Your Retirement Through Mutual Funds

Retirement and pension plans are identical. Whenever someone thinks about saving for retirement, the pension plan is the first thing that comes to their mind. However, with time, mutual fund schemes are treated as one of the finest retirement schemes which are better to manage and more flexible way to save for the retirement. This article delves deeper and talks about how mutual fund investments can be used towards better and tax saving and retirement planning.

But before getting into the details, one must know that retirement planning with best mutual funds schemes has three phases – accumulation of funds, preservation, and distribution. In the accumulation stage, funds are invested in the different portfolio according to investor’s risk profile and time prospect towards retirement. The preservation and distribution phase, however, go parallel with each other and these stages come at the age of retirement. In both these stages, the investor first preserves the accumulate fund which also earns him income in his retirement days.

To be precise, the money in mutual funds is first accumulated and in the latter part, it gets distributed in the form of monthly income to the investors after their retirement. Securing your retirement through best mutual fund investment schemes is flexible, convenient and can be initiated online with mere few simple clicks. In addition to this, there are a variety of mutual funds available, you just have to decide on the asset allocation you want to invest in, and make an investment portfolio consisting of all the low risk and high-risk funds.

Since mutual funds investment for retirement is a long-term investment, so you must invest in diversified equity fund that is a combination of large and mid-cap funds. In case of debt, always choose the long-term debt option. For gold allocation, there are gold ETFs and other long-term gold savings fund available for investment. You may also consider investing in different real-estate portfolios if this domain is flamboyant.

Why are mutual funds better than any other retirement plans?

Gone are the days when retirement savings was more about investing in pension plans, fixed deposits, etc. Today investing in best mutual funds scheme has become the most common type of investment. Though it is subject to market risks, it also claims to provide the largest benefit to the investor in the long run. Other benefits of mutual fund are:-

1. Mutual funds are flexible in nature. Unlike pension plans, Mutual Funds do not restrict investors for making a regular payment or making complete or partial withdrawals in between. Also, you may withdraw your investments anytime with no penalties.

2. Mutual funds come with tax benefits. Long-term capital gains from equity mutual funds are completely tax-free. In debt mutual fund, it is 10% before indexation and 20% after indexation.

3. Mutual funds are transparent and user-friendly. Here you can choose fund as per your choice. Also, information related to fund managers; associated risks, objectives, etc are publically available.

4. A mutual fund is a disciplined approach to save for your retirement. Investments if made regularly and in the right fund type are likely to earn good returns for the investors.

Note: No mutual fund is perfect for all categories of investors. Therefore to determine the most suitable mutual fund for investment purpose; one must consider three factors - Cash requirement, Time Frame, and Tax efficiency. In addition to this, a thorough research should also be done on the list of advantages of disadvantages associated with each fund type before making an investment.
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