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Tata Capital > Blog > Benefits of Investing in Equity Funds to Save for Your Retirement

Benefits of Investing in Equity Funds to Save for Your Retirement

Benefits of Investing in Equity Funds to Save for Your Retirement

Your retirement years should be the golden phase of your life. It is when you reap the rewards of all your hard work and enjoy substantial returns pouring from your investments. By investments, we don't only mean fixed deposits, PPFs, and savings accounts but also market-linked instruments like mutual funds.

Both equity and debt mutual funds are a great way to build your retirement corpus. However, if you wish to earn a shot at exceptional returns, a chunk of your stake must be invested in equities through equity mutual funds.

What are equity mutual funds?

Mutual funds that invest most of their stake in stocks of different companies are called equity mutual funds. Owning these funds is like owning a small part of the company they invest in. Here, the fund manager hedges investments across different companies with varying market capitalizations.

Any financial portfolio diversification is incomplete without investing in equity mutual funds. Typically, equity funds offer high returns and work wonders for investors willing to take some risk. Where debt funds mitigate risk in exchange for low to moderate returns, equity mutual funds offer exceptional returns with some risk.

Importance of equity funds for retirement

Other than the obvious advantage of growing your wealth in the long-term through substantial returns, equity mutual funds come with a host of benefits for retirees. These include:

Additional Read: Things to Look at Before Investing in Equity Funds

Improves liquidity

Most equity mutual funds don't have a nominal or zero lock-in stipulation. This means you can redeem a few or all of your units any time, mostly without a penalty. Such a feature lets you invest in lucrative equity mutual funds without compromising on liquidity. So, should an urgency, medical or otherwise, befall with advancing age, you're always prepared. 

Saves tax

Even senior citizens must pay capital gains tax on their investments. But, you can save on it by investing in tax-saving equity mutual funds like ELSS. For starters, these funds come with a lock-in period of just 3 years, which is shorter than a tax saving fixed deposit (F.D.) of 5 years. And, annual returns up to Rs 1 lakh on ELSS funds are entirely tax-free under Section 80C of the ITA. If you earn more than Rs. 1 lakh per year, only the additional amount is taxed at 10%.

Expertly Curated

Since a fund manager handpicks the stocks that form these funds, you are always in expert hands when investing in them. These professionals are seasoned financial aficionados with the sole aim of conjuring maximum returns for their investors, A.K.A - you. Therefore, your chances of earning big go up significantly.   

Additional Read: 5 Benefits of Investing in Equity Mutual Fund

Final thoughts

Given the liquidity and transparency provided by equity mutual funds, you always have a retirement fund ready sitting and earning significant returns. Use these funds to undertake recreational activities, or as a contingency fund, the choice is yours. But, start investing in them as early as possible to earn significant returns in the long term.

Looking to invest in equity mutual funds online? Turn to Tata Capital Moneyfy app – a seamless portal through which you can compare and apply for any type of mutual fund, start a SIP for as low as Rs. 500 per month, or invest in insurance, etc.

Simply visit our website, create your account, and start your investment journey with us today!

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