SBI mutual fund has launched the SBI Retirement Benefit Fund (SBIRBF). The new fund offer will close on 3 February.
The fund comes in four variants. The mix of equity and debt varies in each variant. For example, the aggressive scheme invests a minimum of 80% in equity, and the rest in debt, real estate investment trusts (REITs) and gold exchange-traded funds (ETFs).
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Aggressive hybrid variant invests minimum 65% in equities and the rest in debt, gold ETF and REITs. These two variants are for aggressive and moderate investor profile.
There are two more variants that have a low proportion of equities and higher debt allocation for those who are conservative or have a low-risk appetite.
The fund also offers insurance cover that is available until the investor reaches 55 years of age. There is also a lock-in of five years or until the investor attains 65 years.
An investor doesn’t get any tax deduction on investing in these funds.
Other retirement funds
Many other fund houses offer retirement funds that come with different variants. For example, HDFC Mutual Fund is a retirement fund with three variants. ICICI Prudential Mutual Fund has a retirement scheme with four variants.
Other fund houses with a retirement fund include Aditya Birla Sun Life Mutual Fund, Axis Mutual Fund, Franklin Templeton Mutual Fund, Nippon India Mutual Fund, Tata Mutual Fund and UTI Mutual Fund.
Schemes that come with variants, typically, have a lock-in, which may differ from one fund house to another. Each variant offers different allocation to equities and debt, like in the case of SBI Mutual Fund.
Should you invest?
Besides different variants and lock-in and a group life insurance cover, these funds don’t offer any extra features compared to other schemes.
For example, instead of investing in a retirement fund’s aggressive variant, an investor can also invest in an open-end diversified scheme, which doesn’t have a lock-in. Investors can withdraw money whenever they want.
Also, retirement is a long-term goal. Ideally, an investor should diversify their retirement portfolio across different fund houses. Preferably, an investor should construct a retirement portfolio with a mix of equity funds and a mix of debt fund.
They can rebalance the asset allocation based on age and changing risk profile, and switch to other funds if the chosen ones do not perform as per investors’ expectations.
Retirement funds could suit investors who are not disciplined and tend to withdraw money. The lock-in ensures that an investor doesn’t touch his retirement portfolio up to a specific period.
Such investors can also look at the National Pension Scheme, which offers only partial withdrawal. It also allows a subscriber to change asset allocation.