Mutual fund Are you thinking about retirement planning? This is the right decision. Retirement planning is essential, and it is usually important to start early and in the right way.
You may be surprised to know why one needs a retirement plan. Retirement planning is essential for some of the reasons given below:
After retirement, your source of regular income will stop, but you will need money, so it is necessary to make retirement planning for your future now.
You don’t know what will happen in the future. You don’t know how long you will live. But you will certainly need funds.
As time goes on, your medical expenses may increase.
Tax can reduce a portion of your retirement corpus if you have not done tax planning properly.
You can plan your future. This will help you plan your career and make better financial decisions.
You will be able to plan expensive vacations after your retirement or may be able to indulge in expensive hobbies which you could not do due to your busy work life.
You can also take early retirement.
With retirement planning, you can lead an independent life without being dependent on anyone.
In your golden period, you will be able to lead a happy retired life.
Invest wisely to accumulate sufficient retirement wealth so that your fund is protected against rising inflation rates. Apart from saving through pension funds, one can also invest in mutual funds.
One of the few investment options that can beat inflation is Mutual Funds.
Mutual funds should be the centerpiece of your retirement strategy. In layman’s terms, a mutual fund pools money from several investors and then invests it in various equity stocks, debt, and money market securities. Mutual funds provide good long-term returns and can help you build a corpus for your post-retirement needs. But, the question here is, which type of assets is best for you keeping retirement in mind?
Here are some of the characteristics of different types of assets:
Equity Shares (Common Stock), Mutual Fund (MF)
Buying shares of a company. Equity shares provide liquidity; You can earn money by selling them when their value increases. Easily sold in the capital market.
In case of high profit, they get profit at a high rate.
Equity gives the shareholders the collective right to control the management of the company.
Equity shareholders get benefits in two ways, annual dividends and profit due to appreciation in the value of the investment of the shareholders.
Equity shares carry the highest risk.
Mutual Fund (MF) is less risky in comparison.
Collective funds of many investors are invested by asset management companies to buy shares of companies from different sectors to provide returns to the investors.
Debt Funds (Stock & MF):
When a company needs funds, it borrows money from investors. In return, they promise to pay steady and regular interest to investors. This is how, in simple words, debt funds work. A debt fund invests in fixed-interest-paying securities.
The basic reason for investing in debt funds is to earn a steady interest income and capital appreciation. The maturity period is pre-decided by the issuing entities of the debt instruments along with the interest rate that you will get. Hence, they are also known as ‘fixed-income’ securities.
Debt funds invest in a variety of securities, depending on their credit ratings.
High credit ratings mean that these entities are more capable of paying interest on the debt security regularly as well as returning the principal amount on maturity.
Debt funds try to optimize returns by investing in securities of all classes. Debt funds can earn good returns from this.
However, returns are not guaranteed. Debt fund returns are often lower than expected. This offers a safe investment opportunity among conservative investors.
People making both short-term (three months to one year) and medium-term (three years to five years) investments invest in debt funds.
There are many types of debt funds: dynamic bond funds, income funds, short-term and ultra-short-term debt funds, liquid funds, gilt funds, etc.
Commodity Funds: (Includes all types of gold investments)
A commodity fund is a fund that is invested in the trading of a particular commodity, such as petroleum products, gold, silver, food grains, coffee, etc., allowing investors to earn returns based on the performance of these commodities in the market. Commodity funds offer a variety of benefits to their investors. However, it is important to be aware of the risks that come with it.
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