Is it advisable for retired individuals to invest in equity mutual funds?

Mutual funds are a tried and tested and much-preferred investment option in India and the world over. Mutual funds let you secure your future financially, improve your financial standing, achieve your goals, and beat inflation. Equity mutual funds, in particular, are known for capital appreciation as they can offer relatively higher returns. However, they also carry a higher risk that may be undesirable in retirement.

Most people switch to debt funds as they move closer to retirement. If you are nearing your retirement and wondering if you should continue investing in equity mutual funds or not, here are some things you should know.

Should you invest in equity mutual funds in retirement?

The ultimate decision lies with you and what your goals are. Typically, most financial experts recommend moving to safe investment options like fixed income securities and bonds in retirement. This is primarily so because you no longer have a long investment horizon to outride the volatilities of the market. Any financial setback at this age can be catastrophic as you may not have enough income streams to keep you afloat. Old age and deteriorating health may also come in the way of picking up a job if you suffer from a financial loss.

However, a SIP in an equity mutual fund can still be beneficial as these funds can help you beat inflation and safeguard your future. If you retire at the age of 60 years, you could still have another 20 to 30 years of retirement ahead of you. Given that the rate of inflation is consistently rising, adding equity mutual funds to your investment portfolio can be a good idea during this phase of life and can keep your wealth growing. Moreover, if you have amassed enough wealth and can afford to take some risk, you can comfortably invest in equity mutual funds without losing your peace of mind.

What should you keep in mind while investing in equity mutual funds in retirement?

It is still important to maintain a favorable balance of equity and debt on your portfolio. You may follow the 100% rule. According to this, you can subtract your age from 100, and the remainder is the supposed right percentage of equity in your portfolio. For instance, at the age of 60 years, you can invest 60% of your money in debt and cash and 40% in equity. At the age of 70 years, this can reduce to 30% in equity. Diversification can be the key here, and keeping a mix can help you lower volatility and risk. If you are uncertain about how to proceed, you can consult a professional to get some clarity.

To sum it up

Mutual funds offer different options like debt, equity, and hybrid funds. These are meant for different risk profiles and investment purposes. Therefore, it is important to determine the right mutual fund for your unique needs.

The Tata Capital Moneyfy app offers various investment options. You can browse through and pick a suitable investment for yourself.