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Retirement planning involves financial planning and the process of determining retirement income goals and deciding the necessary means to achieve those goals. The long-term nature of retirement planning makes Mutual funds a good fit for meeting retirement income goals. However, tactical plays like sector or thematic funds cannot work because of high volatility risk. Nor can narrowly define funds such as large-cap funds work because of limited growth.
Instead, you should take a mix of Multi-cap funds and hybrid funds that are free to move across companies and asset classes, to maximize your gains in the long term. You also need funds that have withstood the test of time. In this article, we give you our select list of long term diversified funds that will help you reach your retirement goals.
Mirae Asset Emerging Bluechip Fund
Category: Equity Large and Midcap
AUM: Rs 7,271 crore
Launch Date: July 9, 2010
Mirae Asset Emerging Bluechip Fund has launched almost a decade ago in July 2010. It has delivered a scorching 23.98% (direct plan) since inception. Money invested in it at inception would now have multiplied about 6 times over. It has been managed by the same fund manager, Neelesh Surana since its existence, bringing a wealth of experience to the table. This is the best mutual funds retirement investment plan for investors.
Mirae Asset Emerging Bluechip Fund was classified as a large and midcap fund in 2017. This means it can invest 35-65% of its assets in large caps fund and Mid-caps fund each, giving the fund manager a fair leeway to move between companies according to market conditions.
It is currently tilted slightly towards large caps with 52% of its assets in them, compared to 42% in midcaps. Mirae Asset Emerging Bluechip has outperformed its benchmark (Nifty Large Midcap 250) over the past 1, 3 and 5 years. On a 1-year basis, it has dipped in line with the benchmark, avoiding the underperformance shown by many of its peers. Investors with a long-term horizon will, in fact, find this to be a good entry point into a spectacularly well-managed fund.
| YEAR | 1 YEAR | 3 year | 5 year |
|---|---|---|---|
| FUND | 10.35% | 20.14% | 22.35% |
| BENCHMARK | 7.76% | 15.67% | 12.11% |
Kotak Standard Multicap
Category: Equity Multicap
AUM: Rs 24,297 crore
Launch Date: September 11, 2009
Kotak Standard Multicap Fund, earlier known as Kotak Select Focus is a veteran of the mutual fund’s industry. It has delivered 15.75% over the past 5 years and 16.96% over the past 3 years, outperforming its benchmark (Nifty 200) over both time periods. Even, on a 1-year basis, the fund has outperformed its benchmark by a significant margin.
With an AUM (Assets under Management) of Rs 24,297 crore, this is a mega-fund, having built wealth for thousands of investors over time. Its long-established track record also makes it ideal for retirement.
At present, the fund manager (Harsh Upadhyay) has moved heavily into large caps (75% of the portfolio) to protect investors from election-related volatility. However, the fund manager has the leeway to swerve dramatically in the opposite direction, depending on market conditions and valuations. Sectorally it is overweight financials and underweight tech stocks and FMCG.
| YEAR | 1 YEAR | 3 YEAR | 5 YEAR |
|---|---|---|---|
| FUND | 11.35% | 16.96% | 15.75% |
| BENCHMARK | 8.87% | 15.59% | 11.54% |
L&T Hybrid Equity Fund
Category: Aggressive Hybrid Fund
AUM: Rs 9,490 crore
Launch Date: January 31, 2011
L&T Hybrid Equity (erstwhile L&T Prudence Fund) is a star of the hybrid fund’s category. The fund has been managed by the highly respected Soumendra Nath Lahiri since November 2012. Its 5-year returns of 12.17% are highly impressive for a hybrid fund.
Note that an Aggressive Hybrid Fund has to keep its equity allocation in the 65-80% range, with the balance being invested in debt. This gives it lower volatility than a pure Equity fund.
Such a fund works great over long periods where asset allocation (equity: debt split) can deliver returns at a lower risk. The fund manager is given the freedom to move more into debt when the market is overvalued and vice versa.
The fund has seen a dip in performance over the past 1 and 3 years in terms of returns, but its longer-term record gives us a measure of confidence that the dip is temporary. This star performer looks poised for a rebound, making this a good time to invest.
| YEAR | 1 YEAR | 3 YEAR | 5 YEAR |
|---|---|---|---|
| FUNDS | 0.83% | 10.58% | 12.17% |
| BENCHMARK | 12.60% | 14.55% | 10.45% |
ICICI Prudential Retirement Fund
Category: Dynamic Asset Allocation
AUM: Rs 29,033 crore
Launch Date: December 30, 2006
A balanced advantage fund is treated as equity for tax purposes but it uses derivatives to reduce the actual equity exposure below the 65% threshold required for an Equity fund. This allows investors to enjoy the benefits of equity taxation without taking some of the risks that come with equity.
ICICI Balanced Advantage Fund is one of the oldest and most successful funds in this category. It has delivered 13.22% annualized over the past 10 years meaning that money you put into it 10 years ago would now have multiplied 4 times over. By contrast, money invested in the PPF 10 years ago would have only doubled.
A balanced advantage fund must not only deliver returns but also reduce risk. In ICICI Balanced Advantage, the fund managers (including the highly respected Sankaran Naren) have reduced the effective equity exposure of the fund to 38%, vastly cutting down on investor risk in the election year. They have also reduced the maturity of the fund’s debt holdings significantly, reducing the risk of rising interest rates. Investors in this fund will find a lot of risk taken care of by its highly experienced fund managers. Interestingly, the fund has been sitting on a huge cash pile equivalent to about 31% of its portfolio which may be utilized post-elections.
| YEAR | 1 year | 3 year | 5 year |
|---|---|---|---|
| FUNDS | 1.96% | 3.74% | 9.35% |
| BENCHMARK | – | – | – |
Reliance retirement fund
Category: Equity Multi-cap
AUM : Rs 1,624 crore
Launch date: Feb 11, 2015
The investment plan aim of the scheme is to give capital appreciation and regular income to the investors which will be in line with their retirement purposes by investing in a mix of securities including equity, equity-related instruments, and fixed income securities. However, there can be no certainty or guarantee that the investment objective of the Scheme will be achieved.
In case the amount of schemes managed by a fund manager is over six, in the performance data of other schemes, the highest three and bottom three schemes managed by the fund manager.
| YEAR | 1 YEAR | 3 YEAR | 5 YEAR |
|---|---|---|---|
| FUNDS | 2.14% | 3.82% | 9.42% |
| BENCHMARK | -3.59% | 1.11% | 7.41% |
HDFC Retirement Savings Fund
Category: Equity Multi cap
AUM: Rs 735 crore
Launch date: Feb 25, 2016
An open-ended retirement solution-oriented scheme having a lock-in period of 5 years or till retirement age (whichever is earlier). This is a stated Tax Savings Cum Pension Scheme which invests 60-80% of the portfolio in Equity and Equity related instruments. The fund will also buy the net assets of the Investment Plan in Debt/Money market instruments to make long term returns and keep risk under control.
The investment goal of the Investment Plans under the Scheme is to provide long-term capital appreciation/income by investing in a mix of equity and debt instruments to help investors meet their retirement goals. There is no certainty that the investment objective of the Scheme will be realized.
| YEAR | 1 YEAR | 3 YEAR | 5 YEAR |
|---|---|---|---|
| FUNDS | 1.96% | 3.74% | 9.35% |
| BENCHMARK | 13.27% | 5.03% | 7.21% |
Franklin India Pension Plan
Category: Hybrid Balanced Hybrid
AUM: Rs 443 crore
Launch Date: Mar 31, 1997
Franklin India Pension Plan is a hybrid fund. It is a retirement fund spending up to 40% in equities and the remainder in fixed income. It is a government declared pension plan offering tax benefits and is suitable for retirement planning. The typical investment horizon is 5 years or more
This fund is a Government announced pension plan offering tax benefits under section 80C up to an investment of Rs.1.5 lakh (subjected to a lock-in period of 5 years or till retirement age, whichever is earlier) with a target amount of Rs.10,000/- or above by the time the investor reaches the age of 60 years.
The fund can invest up to 40% in equities and the balance in fixed income to help investors build a retirement collection and make a regular income post-retirement using convenient withdrawal options.
| YEAR | 1 YEAR | 3 YEAR | 5 YEAR |
|---|---|---|---|
| FUNDS | 4.94% | 3.51% | 9.15% |
| BENCHMARK | 4.94% | 3.51% | 9.15% |
Conclusion
Investors tend to be skeptical about the suitability of ordinary mutual funds when it comes to building a retirement corpus. The Mutual fund specifically targeted towards planning for one’s sunset years seek to address this mindset. Most dedicated retirement funds have only been around for a few years. Recently, Sebi sought to define such products by carving out a separate category—solution-oriented funds. Best mutual funds retirement come under this basket and carry a lock-in of five years or until retirement, whichever is earlier. The lock-in—introduced to encourage long term savings—distinguishes these from regular mutual funds.
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