Retirement is often considered the 'golden' phase of life — the time when most people look forward to slowing down and enjoying after decades of hard work. Rather than financial stress, this period is to focus on peace of mind. Having said that, a major challenge that most senior citizens face is to ensure that their savings last long enough to support them through these years, amid rising healthcare costs, inflation, and the need for regular income.
During this time, traditional options such as fixed deposits (FDs) or pensions may not always be sufficient, and that is where mutual funds come into play as a practical solution.
Unlike high-risk investments that are aimed at aggressive growth, there are specific categories of mutual funds that have been categorically designed to balance safety, income, and modest appreciation, thus making them a better choice for retirees.
Here is a look at four categories of mutual funds that stand out as the “Fantastic Four” for retirees:
1. Equity Savings Funds
These types of funds usually invest in equity, arbitrage, and debt, with a minimum 65% allocation to equity and at least 10% in debt, according to Value Research.
On average, retirees can expect returns typically between 6 and 12%, with very few losses.
This is considered best for retirees seeking stability with modest growth, better than fixed deposits but without sharp swings.
Its key advantage is that they are quiet and steady, making them rarely dramatic, but reliable.
2. Balanced Advantage Funds
These funds dynamically shift between equity and debt depending on the condition of the market. On average, individuals can expect 6–12% returns most of the time, while they have even provided over 12% gains occasionally.
It is best for those looking forward to grow, but with a seatbelt against volatility.
3. Multi-Asset Allocation Funds
In this one, your money gets diversified across equity, debt, and gold, with a minimum allocation of 10% in each.
These funds have generated steady returns, especially over 5 years and are best for investors who value diversification and want to avoid negative returns.
It is a sensible option for those who may prefer added diversification.
4. Aggressive Hybrid Funds
In these, 65–80% of total assets are kept in equity and the remaining in debt.
On average, these have generated higher double-digit returns in 60% of cases, but occasional short-term losses, Value Research noted.
Retirees having other dependable income sources, such as pensions, can go for this one as they can tolerate volatility.
This has the potential for higher growth, but is considered riskier than the other three.
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