How To Ensure The Current Economic Downturn Does Not Impede Your Retirement Plan
Aug 30, 2019

Author: Divya Grover

(Image source: freepik -

Nothing seems to be going right for the Indian equity market.

The past few months have been tumultuous as one fiasco after another shook the stock markets and left investors despondent.

Even the withdrawal of the higher surcharge on super-rich failed to boost the market for too long. This is because many macro-economic issues are still unresolved; the prominent ones being weak rural demand and low industrial output impacting employment and income. Further, there is fear of global recession looming in the coming months.

[Read: Why It Is The Best Time To Build A Strategic Mutual Fund Portfolio To SIP Into]

The RBI in its annual report for 2018-19 acknowledged that a broad-based cyclical downturn is underway in several sectors. In addition, it mentioned that there are still structural issues in land, labour, agricultural marketing, and the like that need to be addressed.

While RBI and the government have initiated fiscal and monetary measures to push the economy back to growth, it could be a while before these steps show visible results and take the financial markets out of this flux.

It is a challenging time indeed. As an investor, you may be feeling anxious about the growth of your money, particularly because the current economic downturn could possibly impact your retirement plan. Rightly so, it is an important financial goal that involves long-term planning. And market conditions haven't shown any major signs of an upward swing in the foreseeable future.

[Read: Want To Multiply Your Portfolio Returns In A Volatile Market? Read This!]

But remember, to be successful at investments is the ability to take advantage of hidden opportunities during volatility, which is the very nature of equity markets. How adeptly we perceive the situation and devise an efficient strategy decides the direction of our wealth growth trajectory.

In a way, volatility can be a good litmus test to know if your retirement plan is downturn and recession proof.

Rule of thumb: A good retirement plan means that you should not have to revisit your portfolio every time the market is in distress.

Your retirement portfolio should be created based on your risk profile and time horizon and not based on market conditions. In fact, for long-term goals, such as retirement, short-term market volatility does not really matter.

Ideally, you should start investing for your retirement when you are young. Equity mutual funds can help you tide over volatility in the long run and create a bigger corpus for your retirement. Create a portfolio of diversified equity funds and invest via the SIP mode to reap the maximum benefit.

Large-cap fund, multi-cap fund, and value style funds should form the core part of your portfolio, while, the satellite part of your portfolio should include a mid-cap fund, large & mid-cap fund, and an aggressive hybrid fund. Carefully assign weightages to each category and the schemes to create a robust portfolio.

[Read: Thinking Of A Blissful Retirement? Here's Why You Can't Ignore Investing In Mutual Funds]

To select the right fund for your retirement, select the one that has consistently performed better than its benchmark and category peers. This means you need to assess the schemes based on their quantitative and qualitative parameters.

Mutual fund houses offer a solution-oriented scheme for your retirement needs known as `Retirement Fund'. These funds invest in equity and equity related instruments and come with a lock-in period of 5 years or till retirement age, whichever is earlier.

Retirement funds may not be ideal for you since every investor's requirement is different. If you still decide to invest in a Retirement fund, you must approach it very carefully because if the scheme underperforms you will not be able to exit or switch during the lock-in period.

Traditional investment schemes like provident fund can help in capital protection and provide steady income post-retirement. Thus, allocate a part of retirement portfolio towards provident fund. You can also invest a portion in physical gold and gold funds to further diversify your portfolio.

As your retirement approaches, you should gradually rejig your equity mutual fund portfolio to invest in relatively safer and less volatile assets like debt mutual funds.

[Read: What Are The Myths Holding You Back From Retirement Planning?]

To make sure that your portfolio is on the right track to achieve your retirement goal, conduct a periodic review of the funds in your portfolio and weed out any non-performers. If you have selected the right funds, you will not have to churn your portfolio often.

An important factor that can derail your retirement plan is taking on high interest loans and investing in illiquid assets. Loans provide you easy access to money, but paying EMIs can prove to be a burden because it eats into your income and savings for future needs.

Investing in illiquid assets like property and/or a second home (which is not used for any purpose), artefacts, antiques, etc. can also prove to be financially burdensome as these do not generate any income/gains.

A part of your savings should be parked to build an emergency corpus for unexpected situations like medical emergencies, job loss, etc. These savings should be parked in liquid assets like bank deposits and liquid/overnight or short-term funds. You should also protect the future of you and your family by having a suitable medical and life insurance cover.

So build a retirement plan that helps you live the life you want and not a compromise.

"It's not how much money you make, but how much money you keep, how hard it works for you and how many generations you keep it for." - Robert Kiyosaki

Editor's Note: If you want to retire blissfully and rich, don't miss out on PersonalFN's Retire Rich service. This is a new exclusive service designed with the sole intent of securing your retirement fund.

In addition to this, you will gain the benefit of investing in Top 5 funds along with a DIY (Do It Yourself) retirement solution, where you can start planning for your retirement and potentially build a substantial corpus that could sustain you in the golden years of your life.

Happy Investing!

Add Comments

Oct 15, 2019

Pls reader's digest India today Education knowledge people matres step by step masters degree online learning social networking communication skills thanks

Daily Wealth Letter

Fund of The Week

Knowledge Center

Money Simplified Guides (FREE)

Mutual Fund Fact Sheets

Tools & Calculators