A Stable Investment

I wanted to plan for my retirement. I have 20 years time.  What is the role played by a balanced fund in a retirement plan? Should I choose some equity-oriented balanced fund, large-cap equity fund, or UTI Retirement Benefit Pension Fund?

You would first have to see that what is the minimal amount of money that you would require, what are your savings till now, and what is the return you are getting on these savings.

As you have 20 years time, you can start accumulating in earnest now. You have to plan this carefully and doing this through an advisor would be helpful.

If you have to choose in between these – equity or a pension plan, then it must be said that a pension plan is just for namesake, even though you do get tax benefits. But opting just for a pension plan would cut down on your options.

It would be advisable to go for a Balanced fund because, for investors like you, stability-with-growth is very important. Also, when there is a rise in the equity investment, then generally people do not rebalance their portfolio; they don’t book profits either. A balanced fund does this for you automatically. 70 per cent of the money remains invested in equity in a balanced fund and 30 per cent in fixed income. So, when there is a drop in the stock markets, it does not reflect so badly. 

This article was originally published on February 12, 2010.