5 Retirement Mutual Fund Sips To Consider In 2021

September 1, 2021

Mutual funds are an excellent way to spread out risks. They are tailored according to the risk appetite of the investor. In essence, they take care of the downside of investing due to professional management and superior research capabilities.

SEBI designated Retirement Mutual Funds as a separate category so that investors can plan their retirement efficiently. These solution-oriented funds usually invest in low-risk securities to ensure steady returns. The biggest advantage of investing in a retirement fund is that the investor continues to receive returns post-retirement. Investing in Retirement Funds is exempted from Income Tax under Section 80CCC up to Rs. 1.50 lakh per year. These solutions-oriented retirement schemes come with a fixed tenure of 5 years or till retirement.

How To Choose The Best Retirement Plan?

The first thing to consider, while investing in Retirement Funds, is the time period left for retirement. This also defines risk tolerance. For example, someone who is between 35-40 years can choose to invest in a moderate-risk fund that offers steady returns over a period of time. Younger people can take an aggressive approach. Whatever your risk profile, the idea is to beat inflation and amass a decent corpus that will allow you to lead a comfortable lifestyle.

Another factor is to identify what kind of growth you would like to achieve. If your goal is steady growth with moderate risk, you can invest in equity as well as Debt Retirement Funds.

Remember, the longer your investment duration, the higher the returns will be. You can invest in Retirement Funds through a Systematic Investment Plan (SIP). Consider this, if you are 35 years, and retire at 60, you have 25 years to plan for retirement. If you invest Rs 5000 every month through SIP, at 15% annualized return, you will be able to create a corpus of Rs. 1.62 crore.

The biggest benefit of SIP is its ability to utilize the power of compounding. It also helps in rupee-cost averaging, meaning the investor need not worry about volatility. One can also invest lumpsum if he has extra money that is lying idle. Lumpsum investments deliver higher returns in the long run.

Here is the snapshot of the performance of Retirement Funds


Scheme Name AuM (Cr) 6M YTD 1Y 2Y 3Y 5Y
Tata Retirement Savings Fund - Progressive Plan 1,126.88 15% 18% 36% 22% 11% 15%
Tata Retirement Savings Fund - Moderate Plan 1,492.64 13% 15% 31% 21% 11% 13%
Axis Retirement Savings Fund - Dynamic Plan 275.86 12% 14% 33% - - -
ICICI Prudential Retirement Fund - Pure Equity Plan 109.4 17% 26% 49% 21% - -
ICICI Prudential Retirement Fund - Pure Debt Plan 361.56 3% 2% 5% 7% - -

Which Mutual Funds To Invest In?

There is no such thing as the best mutual fund. Retirement planning is a multi-decade effort, hence it is impossible to predict which fund will perform best over the period of few decades. However, one can analyse the past performance, the expertise and performance of the fund manager, Alpha, Sharpe Ratio etc.

If we consider the background of the respective AMCs, it is clear that the funds have consistently outperformed Benchmark in a ten-year period. For example, Take Axis Asset Management Company manages 45 different mutual funds having 60 lakh investor accounts. The equity and hybrid funds have delivered above average returns. The debt funds performance is satisfactory. It also operates three International Funds. The AMC has competent fund managers with a proven track record.

TATA is a household name in India. Tata Asset Management Company (TAM), established in 1994, is among the oldest asset management companies in the country. The company had Rs 76,505 crore in assets under management. It manages more than 65 schemes across various categories. It’s equity schemes have delivered a 3-year CAGR of more than 12%.

The same can be said about ICICI Asset management Company. It has 62 lakh investors and manages 68+ schemes with 4,28,085 crore worth of assets under management.

Your best bet is to consult a qualified financial advisor that can create the right portfolio mix for you. A good financial advisor focuses on asset allocation, and not fund allocation. This behaviour separates them from the average investors.

Whatever time you have got, it is never too late. It is important to start retirement planning now.

The author, Abhinav Angirish, is Founder at Investonline.in. The views expressed are personal

(Edited by : Anshul)

First Published: IST