I joined one of the public sector banks eight months ago. After earning for two months, I invested in LIC Jeevan Anand, Public Provident Fund, two recurring deposits and an ELSS - Franklin India Taxshield. Is this sufficient for retirement? Please guide me.

Shiva Sai

It is very good to see you planning for your retirement as soon as you embarked on your career. Such an early start will ensure that you get to a good retirement kitty without stretching yourself too much.

However, in choosing products for your retirement portfolio, you have opted for too many fixed income products and too little equity. The key risk in playing it too safe is that your portfolio may not beat inflation over the long term. You may not be able to accumulate a sizeable corpus.

We think you should rejig your savings as follows. LIC Jeevan Anand is a whole life-cum-endowment policy which insures you for your entire life, but is likely to generate low returns that may fail to keep up with inflation. Instead of committing your savings to such products, it would be better to buy a pure term plan online (you can check out LIC’s site for one) and free up those savings for investing in an equity fund.

PPF remains a reasonable option to build a retirement kitty, with its tax-free returns linked to prevailing interest rates in the economy. While recurring deposits may be a good option to park emergency money or meet your immediate needs, RDs don’t make for a great retirement option, again because of inability to beat inflation after taxes.

Instead of the above, we would suggest that you rely on the PPF and voluntary EPF at your workplace for the fixed income portion of your retirement savings. For the rest, given that you have a long horizon left to retire, you should start off SIPs in balanced funds (if you are conservative) or multi-cap equity funds.

Among balanced funds, we would suggest Tata Balanced Fund, L&T Prudence Fund or SBI Magnum Balanced Fund as choices. Among multi-cap funds, apart from continuing with Franklin India Taxshield, you can consider Franklin India Prima Plus, ICICI Pru Value Discovery and Mirae Asset India Opportunities.

I am 25 and have just started my career. After reading up and doing a bit of research I have started with investments of ₹2,500 per month in the following funds: ₹1,000 in Canara Robeco Short Term Fund, ₹1,000 in DSPBR Micro Cap fund and ₹500 in Franklin India Taxshield. I need a part of my savings in the short run (in about two years) and the remaining will stay invested for 25-30 years. I can increase the investment amount every quarter. 

I also have investments in recurring deposits with a bank and PPF.  Please guide me as to how to progress keeping both the short-term and long-term requirements (retirement) in mind.

Shreyasee 

While the SIP route works well for volatile return products such as equity or balanced funds, it isn’t essential to do a SIP for a short-term debt fund.

However, if that is the only way you can manage regular savings, there is no harm in continuing with your SIP. We would suggest slight tweaks to your portfolio. One, invest lumpsums whenever you have a surplus (or SIPs, if those are your only savings) in SBI Short Term Gilt Fund in place of Canara Robeco Short Term Fund. The former has a better track record. Two, because micro-cap funds can deliver volatile returns and are risky, it is advisable to sign up for a larger SIP in a large-cap fund like Franklin India Taxshield and a smaller one in DSP BlackRock Microcap. You can step up your investment in Franklin India Taxshield when you have a larger surplus in order to achieve this balance.

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