Financial planning for retirement can be broadly divided into two phases: the accumulation phase when you are earning, saving and investing, and the decumulation phase, when you are drawing from your investment kitty. There are also sub-parts to this: during the accumulation phase, there are multiple financial goals on which you spend money, and for which you need to plan. But between these two phases, there is also the consolidation phase. Here, say from age 55 to 60, you gradually move from riskier assets, which are more volatile, to the defensive assets to de-risk your portfolio in your golden years after retirement.
Let’s see how fixed-income funds can help you in the financial planning process in this stage.
What They Offer
Stability: Returns from fixed-income funds are relatively more stable than equity funds. The reason is that fixed-income instruments, such as bonds or bank deposits have a known rate of interest, which is taken into account in the daily net asset value (NAV) computation. This is, however, not the case with equity funds, where dividend is taken in the NAV only when it is paid. Price volatility in the equity market is also relatively higher, which makes the NAVs of equity funds fluctuate more. Hence, you should invest a part of your portfolio in fixed-income funds for stability.
Visibility: Fixed income assets give better clarity on the amount and timing of cash inflows. For instance, bonds have a defined maturity date and amount, while in case of mutual funds, target maturity funds (TMFs) have a defined maturity date and an estimate of the returns, which is somewhere around the initial portfolio yield-to-maturity (YTM). YTM data for funds are available in the monthly factsheet.
この記事は Outlook Money の July 2024 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です ? サインイン
この記事は Outlook Money の July 2024 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です? サインイン
Tax Reforms: What's In Store?
The government is working on reforming the existing Income-tax Act, 1961. The impending reforms have raised many questions in the minds of taxpayers. Will the old regime and deductions be done away with? Will it really simplify your life? What's the need for these reforms? We try to answer these and other questions regarding tax reforms
5 Questions That Will Lead You To The Right Financial Planner
Choosing a financial planner is not as easy as it may seem. Besides the right credentials, you should also consider things like the kind of services you will be needing-tax advisory, estate planning-as well as the fee structure. Here are five questions that will help you choose the right planner
Health Insurance Sub-Limits
Sub-limits in health insurance are restrictions placed by the insurance company on the SP maximum amount they will pay for specific expenses that are part of the total hospital bill.
Delayed Gratification, Humility, Understanding Inflation And Risks Key To Financial Success
The journey to financial success is continuous, requiring patience, education, and disciplined decision-making.
Avoiding Common Pitfalls through Asset Allocation and Multi-Asset Investing
Just as you track the calories and nutrients for a well-balanced diet, you need a balanced portfolio that has multiple assets to balance the risks and returns.
Mutual Funds for Financial Growth
Mutual funds allow you to invest in small amounts and seize the compounding growth, and experts help tackle volatility and asset allocation, making them a potent tool to create wealth.
Multi-Asset Investing is The Financial Equivalent of A Well-Balanced Diet
Just as you track the calories and nutrients for a well-balanced diet, you need a balanced portfolio that has multiple assets to balance the risks and returns.
Theme and Triumph: How Thematic Funds Can Boost Your Bottom Line
Thematic funds target high-growth opportunities in various industries and economic sectors, allowing investors to participate in future-focused segments to generate long-term returns.
Wealth Creation Through SIP - The Slow & Steady Road to Success
For investors seeking to create long-term wealth, SIPS are a powerful tool that enables regular, disciplined investments to generate compounding returns.
Tuition Fee Varies Among Countries
I am 22 years old and have recently started working in a software company.