Best Investments After Retirement

Divya Nair

17 Dec 2016

Common Indian mindset is that the regular pension or lump-sum amount withdrawn from various investments made earlier in life, will suffice to lead a comfortable and financially independent life post-retirement. But, its time you moved over this age-old concept and make better use of your retirement corpus. Investing your money in schemes which have short-tenure, beat effects of inflation, offer decent returns and liquidity, is the key to using your retirement corpus the best way possible.

Some Of The Best Investment Schemes After Retirement Are:

Invest In Balanced Mutual Funds:

A retirement portfolio should ideally consist of stocks, bonds and little cash. Balanced mutual funds invest in all these asset classes, therefore minimising the losses arising out of effects of inflation. Inflation can eat up the total returns earn from investments. At the same time, investing in balanced fund can provide the needed diversification to your investment portfolio. People with moderate risk appetite can try investing in balanced funds as these offer good return. On top of that, these funds enjoy tax-free returns if the holding period is more than a year.

Monthly Income Plans (MIP):

MIP is a type of debt mutual fund and are linked to the market. They decent returns and also tax benefits. But as with any market linked investment, investments in MIP also carry some amount of risk. When you invest money in an MIP, fund managers channel 15-20% of your money in equity and the remaining amount is invested into corporate bonds and government securities.

Senior Citizens Savings Scheme (SCSS):

It is a scheme offered by government for any person of age 60 years or above. But people between 55 and 60 can also opt for this scheme (provided they have retired on superannuation or under the Voluntary Retirement Scheme). The scheme offers an interest rate of 8.6% which is compounded quarterly.

Post Office Time Deposit (POTD):

Under POTD, investors deposit an amount for a certain period and on maturity they get that amount back with interest. The maximum term for POTD is 5 years. If you do not withdraw your funds at maturity, your deposit automatically gets renewed for the period selected originally. When your deposit gets auto renewed, the interest rate prevalent on the date of maturity is taken into consideration. The interest rates for POTD increase with an increase in tenure.

Post Office Monthly Income Scheme (POMIS):

Individuals can deposit a maximum of Rs 4,50,000 and Rs 9,00,000 for a joint account. A person can also open multiple accounts in various post offices, provided the total amount deposited in all the accounts do not exceed the maximum limit.

Conclusion:

Each one of us wants to lead a relaxed life after retirement. On top of a comfortable financial life post-retirement, arranging for a regular income source, would be cherry on the cake. Having a diversified investment portfolio would be the ideal financial strategy for people after retirement so that loss in any of the assets is discounted by profits in another set of assets in the portfolio.


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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Best Investments After Retirement

Divya Nair

17 Dec 2016

Common Indian mindset is that the regular pension or lump-sum amount withdrawn from various investments made earlier in life, will suffice to lead a comfortable and financially independent life post-retirement. But, its time you moved over this age-old concept and make better use of your retirement corpus. Investing your money in schemes which have short-tenure, beat effects of inflation, offer decent returns and liquidity, is the key to using your retirement corpus the best way possible.

Some Of The Best Investment Schemes After Retirement Are:

Invest In Balanced Mutual Funds:

A retirement portfolio should ideally consist of stocks, bonds and little cash. Balanced mutual funds invest in all these asset classes, therefore minimising the losses arising out of effects of inflation. Inflation can eat up the total returns earn from investments. At the same time, investing in balanced fund can provide the needed diversification to your investment portfolio. People with moderate risk appetite can try investing in balanced funds as these offer good return. On top of that, these funds enjoy tax-free returns if the holding period is more than a year.

Monthly Income Plans (MIP):

MIP is a type of debt mutual fund and are linked to the market. They decent returns and also tax benefits. But as with any market linked investment, investments in MIP also carry some amount of risk. When you invest money in an MIP, fund managers channel 15-20% of your money in equity and the remaining amount is invested into corporate bonds and government securities.

Senior Citizens Savings Scheme (SCSS):

It is a scheme offered by government for any person of age 60 years or above. But people between 55 and 60 can also opt for this scheme (provided they have retired on superannuation or under the Voluntary Retirement Scheme). The scheme offers an interest rate of 8.6% which is compounded quarterly.

Post Office Time Deposit (POTD):

Under POTD, investors deposit an amount for a certain period and on maturity they get that amount back with interest. The maximum term for POTD is 5 years. If you do not withdraw your funds at maturity, your deposit automatically gets renewed for the period selected originally. When your deposit gets auto renewed, the interest rate prevalent on the date of maturity is taken into consideration. The interest rates for POTD increase with an increase in tenure.

Post Office Monthly Income Scheme (POMIS):

Individuals can deposit a maximum of Rs 4,50,000 and Rs 9,00,000 for a joint account. A person can also open multiple accounts in various post offices, provided the total amount deposited in all the accounts do not exceed the maximum limit.

Conclusion:

Each one of us wants to lead a relaxed life after retirement. On top of a comfortable financial life post-retirement, arranging for a regular income source, would be cherry on the cake. Having a diversified investment portfolio would be the ideal financial strategy for people after retirement so that loss in any of the assets is discounted by profits in another set of assets in the portfolio.