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SIP for Retirement Planning

I want to invest monthly Rs. 4000 in SIP's (Mutual funds) for my retirement purpose. Please suggest me the best Mutual Funds for retirement purpose in long term basis?

Sep 2, 2015 by Sunil Kumar, Chennai  |   Mutual Fund

You have not indicated your age or time horizon to retirement. If you have a long term investment horizon you should invest through monthly SIP’s in diversified equity funds. Multicap or flexicap diversified equity funds are ideal for long term investment objectives. They have the potential to give higher returns that purely large cap funds over a long investment horizon. At the same time, their downside risk is limited compared to small and midcap funds. Franklin India High Growth Companies, Franklin India Flexi Cap, Franklin India Prima Plus, ICICI Prudential Exports and Other Services, Birla Sun Life Advantage Fund, Birla Sun Life Long Term Advantage Fund, Birla Sun Life India Gennext, Principal Growth Fund, SBI Magnum Multiplier, SBI Magnum Multicap and UTI MNC fund are among the best multicap diversified equity funds. Most of these funds have given in excess of 20% annualized returns over the long term. If you have a 20 year retirement planning horizon, assuming you get 20% return, you can accumulate a retirement corpus of nearly Rs 1.25 crores with a monthly SIP of Rs 4000. If you have a 15 year retirement planning horizon, with Rs 4000 monthly SIP, you can accumulate a corpus of Rs 45 lacs. When investing through SIPs over a long investment horizon, you may also want to opt for the SIP Top up plan, whereby your monthly SIP is topped up a certain amount every year. Consequently with SIP top up, your investment keeps increasing with your income, thereby enabling you to build an even bigger corpus.

If you have a lower risk appetite, then you should choose Balanced Funds like L&T India Prudence, SBI Magnum Balanced, Franklin India Balanced, Tata Balanced, Birla Sun Life 95, ICICI Prudential Balanced or HDFC Prudence Fund. These funds on an average have given around 15% returns in the long term. While the returns of balanced funds are a bit lower than diversified equity funds, the risks are also lower.

You should consult with your financial advisor as to which fund(s) will suit your retirement planning goals the best and then invest accordingly.

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