Thursday, August 19, 2010


Rajshekar asked :
Sir I have Index Funds and want to stay invested with them till retirement. What is your view on Franklin Dynamic FOF and UTI Retirement Benefit Fund? Is my decision right. If not, which is best retirement solution mutual fund?


Dear Rajshekar,
    At the outset, you have chosen the right asset class (mutual funds) for your retirement planning , and the not the mistake which most people do, by taking up Insurance as their Retirement Kitty.

     Though Index Funds should have been the ideal solution for your retirement, the fact that in India, Diversified Equity Funds have more often than not, beaten the Index Funds handsomely makes them the obvious choice for you. Especially, the fact that you would stay invested for at least 15 years makes the case stronger.

    But it is always a good idea to have a combination of assets to fund your Retirement rather than betting on just one particular kind of scheme to mitigate risks.

     Diversification should be given the highest priority. Your Portfolio should have an ideal mix of Equity, Debt and other asset components. This will of course, be dynamic, and keep changing depending on your age, risk profile and time horizon of your retirement.
     When in doubt, follow the golden rule, 100 minus your age should be your equity exposure. That is, if you are 30, then 100-30, i.e, 70 % should be equity exposure and this should gradually reduce as you age.
     It is always advisable, to dispose off your equity funds/real estate(if invested for retirement) about 2-3 years before your actual retirement and switch this amount into Debt. This will not only ensure that you lock in the capital gains you would have made, but also protect your capital from volatility.

Just because you can stay invested for 20 years, does not mean "Invest and Forget". Keep reviewing your investments every 6 months or so to see any noticeable change in any fund's mandate/performance/attribute.

Slowly, as the years progress, switch out from Diversified Equity Fund to Large Cap Funds and then further to Balanced Funds to give better stability to your Portfolio.

While Franklin Dynamic FOF is good, no doubt, the minus point about this fund is that the Fund invests only in In-House Funds. You can know about this fund here……….
The Fund automatically times the market by booking profits when the markets are overvalued and entering the markets when they are cheap. While this strategy helps in locking your profits, it prevents you from reaping compound returns. This Fund is more suited to conservative investors and definitely not you since you already two ‘safety first’ funds.

You can consider UTI Retirement Benefit Fund at a later stage. This Fund is a Balanced Fund with a debt bias. The equity portion is passively managed and is being invested in large-cap stocks. Investors can only expect moderate returns from this segment. The Fund fails to ride the bull markets fully and hence you would lose the compound return equities are expected to provide. Read more about the fund here……

For now, you invest in Good Diversified Equity Funds and take the call to switch to safer large caps and balanced funds (HDFC Prudence, DSPBR Balanced Fund, etc) as  you are near retirement.

Ultimately it all boils down to ideal asset allocation and clear planning. You need to revisit your planning regularly and make adequate changes, if necessary.

You are advised to read ……..
This article will help you on how you should go about planning your retirement.

Best of luck,
Srikanth Matrubai

Also visit


  1. Wherever you are, it is sensible and advisable to choose a retirement plan for yourself early in to or just before your retirement so that your retirement years are pleasant and stress free for both you and your spouse or loved ones. There are number of retirement plans,Top Mutual Funds for retirement and retirement plan options out there to choose from.

  2. Your blog is very useful for me,Thanks for your sharing.



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