Most people only think about their retirement once they are near to their retirement. Before that they usually use the proverb ” Dekha jayega”. Entire life of majority of people is spent in attending to one requirement after another. You even might relate these needs, like owning a vehicle and a home, raising a family, to kids’ education, to their weddings and so on. By the time these responsibilities are taken care of, we see that it is just around the corner. Then a few of them a stock market course will take care of their needs.
Planning for retirement must begin as early as possible at not years before retiring. Whatever your earnings and lifestyle, you can permanently save the money you have left after paying for all your expenses. Even if the amount is small, if you are investing in the right instrument, you can help you create wealth over the long term. And what better tool than Mutual Funds? You can invest in mutual funds monthly through SIP with an amount as little as Rs. 500 a month. This way you can slowly increase the amount as your income/savings grow and is often told in many stock market webinar.
So, in this blog, we will look into how you can plan for retirement with MFs. For this, you don’t have to spend a lot of research about the companies and get handsome returns without attending any stock market course online. You’ll be amazed to see the power of compounding working out its magic.
- Monthly SIP: ₹1000
- Estimated return rate: 12%
- Investment tenure: 25 years
- Invested amount: ₹3,00,000
- Estimated returns: ₹15,97,635
The total value of the returns: ₹18,97,635
How can we do retirement planning?
The first step is to find the rate of return you require before starting the retirement plan. This step will help you understand which asset class you should invest in.
We will calculate the rate of return with the help of a calculator, whose link you will find in the description. This is something which we help our students within our stock market course online. The first step is to input all of these details:
You can see that once you fill this column you are able to see the rate of return you will require.
Currently it shows that the rate of return required is 11.8%
Based on the return you require and the risk you are willing to take. We will discuss how you can do retirement planning.
If the return Required is between 10-12%:
1. Index Funds or ETFs
If your required return falls in this category, then as per best stock market course, you should go forward with Index Funds. Index funds are those funds which track a particular market index and invest accordingly. In the case of India, it follows the Nifty 50 index and Sensex and invests in a similar proportion. An investor should invest in the funds with the slightest tracking error.
Where should you invest- Index ETF or an Index Fund?
Suppose you want to do a SIP in the index. Then index funds are your go-to option as you can automate the SIP. Index Funds provide the added benefit of rupee-cost averaging. It lowers the average cost of owning the units.
On the other hand, ETFs are traded just the way stocks are. Any dividends, if they are there, are deposited to your registered bank account directly. This deposit is a hassle from a financial planning point of view because this dividend amount would have to be manually reinvested in the portfolio. While choosing index funds, one can opt for a growth plan where dividends are automatically reinvested.
On the other hand, if you can invest the dividends back into the ETFs or even do the averaging when the market falls, then Index ETFs are for you. As you can save up a lot of money as the expense ratio of the ETF is very low.
For example, the HDFC NIFTY 50 ETF comes at an expense ratio of just 0.05%. At the same time, the Index Fund variant, the HDFC NIFTY 50 Index Plan, has an expense ratio of 0.20% for its direct variant, a vast difference of nearly four times.
Please note that the three years return can be very deceiving due to the Covid bull run, so don’t set unrealistic expectations. 5-year returns can set realistic expectations as per most stock market webinar. This expectation will hold for all funds that we will mention.
(In case this is not clear check the excel sheet “Best MF for Retirement”)
Balanced Advantage Funds
A balanced advantage fund works because different asset classes are subject to various risks and can earn additional returns at other points in a market cycle. This type of mutual fund invests in a mix of stocks and FD-like instruments. However, they keep changing this allocation based on the market conditions to provide optimal returns with minimal risk. As per best stock market courses in Delhi, it is suitable for an investment horizon of 3+ years.
How do balanced advantage funds work?
- Some balanced advantaged funds use counter-cyclical dynamic asset allocation models. These models assist in decreasing equity allocation and adding fixed income and/or hedging allocation when the equity valuations are high. If equity valuations are low, the same model increases equity allocation and simultaneously reduces the distribution of hedging and/or fixed income. In such asset allocation models, one is “buying low and selling high.
- On the contrary, few balanced advantage mutual funds use pro-cyclical dynamic asset allocation models. These models aim to profit from the upside during the bull market and protect the downside in bear markets. Funds employing pro-cyclical models increase their equity allocation in rising markets and reduce it in falling markets.
An investor, especially a new one looking to capitalise on the growth potential of equity in the long term but at a relatively lower volatility level than pure equity funds, can look at a balanced advantaged fund category as per best stock market courses in Delhi.
- It is suitable for an investment horizon of 3+ years.
Aggressive Hybrid Funds
Aggressive hybrid funds are mutual funds that primarily invest in stocks and allocate only a limited amount of capital toward debt instruments. Aggressive funds can only invest a maximum of 80% into equity. Since investments are spread across avenues under aggressive hybrid funds, they carry far fewer risks than purely equity-oriented funds. However, over the long term, aggressive hybrid fund returns align with equity funds, as per online Stock Market Courses in India.
Aggressive hybrid funds function by investing in equity as well as debt instruments. That said, these funds must allocate 20 per cent of their assets toward debt instruments. Equity and equity-related instruments can enjoy a maximum of 80% asset allocation.
These funds suit first-time equity investors and conservative investors who want equity exposure. They can also mitigate the risks of high-risk investors who wish to invest heavily in equity and haven’t done any online Stock Market Courses in India. These funds need a minimum three-year holding period.
If the Return Required is between 12-15%.
Large Cap Funds
By SEBI’s mandate, large-cap funds must invest at least 80 % of their assets in large companies. By definition, the top 100 companies by market capitalisation are termed as ‘large caps’. So, large-cap funds are a convenient way to take exposure to well-established, frontline companies across sectors. These types of funds are suitable for the conservative investor as per stock market paid course.
82% of large-cap schemes have underperformed benchmarks over the last five years. But the funds that we have mentioned in our list have outperformed.
Flexi Cap Fund
As the name suggests, a flex-cap fund empowers investors to put their money into companies with different market capitalizations. It helps in mitigating the risk and lowering volatility in the portfolio. These funds are also known as multi-cap funds or diversified equity mutual funds. Unlike small-cap or mid-cap funds, which focus on investing in stocks as per market capitalization, flexi-cap mutual funds invest in any company, whatever the company’s market capitalization is. It is one of the best ways to start investing as per stock market courses online free with certificate.
The fund manager analyzes the growth potential of various companies regardless of their market capitalization and invests the funds across multiple market segments and companies. These mutual funds are also famous for delivering steady returns even during a bear market.
Also, the fund manager can choose to assess the fund allocation and switch between different companies and sectors depending on the performance from time to time.
Large and Mid cap fund
Large-and-midcap funds invest at least 35% each in large-cap and mid-cap stocks. Depending on their mid-cap allocation, these funds can be more volatile than large-cap and even some multi-cap funds. These funds can be used to get exposure to mid-cap stocks without taking on the very high risk of a mid-cap fund.
Suitable– Large-and-midcap funds suit investors with low to moderate risk appetites. Those who want to start with minimum risk, are advised by stock market courses online free with certificate to start with Large Cap funds. The minimum period for these funds to be held is five years.
If the Return Required is between above 15%.
You can also include Flexi cap in this category also
Mid Cap Fund
If the Return Required is above 15%.
You can also include Flexi cap in this category, also
- Mid-Cap Mutual Fund
Mid-Cap Mutual Funds are equity mutual funds investing in mid-sized market capitalization Indian companies. These companies are amongst the fastest-growing Indian companies. These companies are at a stage where today’s leaders were a few years back. Mid-cap mutual funds invest at least 65 % of the corpus in companies lying between 101-250 by market capitalization. Compared to large-cap companies, mid-cap stocks often have higher growth potential for investors while being less volatile and risky than small-size stocks.
Midcap funds suit investors with moderate to high-risk capacity as per stock market paid course. The minimum period for these funds to be held is five years. Higher-risk investors with longer timeframes can allocate more to these funds.
2.Small Cap Fund
Small Cap equity funds invest in Indian small-cap companies. These companies are beyond the top 250 and are primarily unheard of. While they can deliver fantastic returns, small-cap companies are incredibly volatile, and you can see short- and medium-term losses. Many people who opt for best stock market course have often suffered losses while investing haphazardly in these mutual funds.
As per current SEBI guidelines, Small Cap Equity Mutual Funds are bound to invest at least 65% of their funds in small-cap company stocks. Small-cap funds suit investors with high-risk appetites. The minimum period for these funds to be held is five years.
If you are investing in very aggressive categories like Mid and small-cap, then you have a minimum of 5-7 years of the horizon. Also, don’t invest in aggressive types if you start retirement planning very late. For planning your retirement in the most optimal way, you can opt for best stock market course.