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personal finance

Should I invest in mutual funds via SIPs or insurance policies for my retirement?

I am 26, married, and have been serving in the Army for the past eight years. I will retire in 2028. Should I invest in mutual funds via SIPs, or in insurance policies? How should I plan my finances?

Jayant R. Pai, CFP and Head of Marketing, PPFAS Mutual FUND says, “Traditional insurance plans offer inadequate life cover, limited returns and come at a high premium. So, it is advisable for you to purchase adequate term insurance cover and invest 25-30% of your income in equity mutual funds via SIPs. It is also important that you have adequate emergency funds available. You could invest in liquid funds or bank deposits to build an emergency corpus. Given that you will be retiring at a fairly young age, you have enough time to change track and opt for a new career. While the pension you receive from the Army will be one source of income, you could also increase your earning potential by gaining educational qualification of your choice or using the accumulating capital to start a business.”

I want to invest Rs 10,000 per month in mutual funds for 6-7 months. Please suggest schemes that allow instant redemptions and don’t charge exit load.

C.R. Chandrasekar, CEO and Co-Founder, says, “Given your time frame, liquid funds will suit you best from a risk and liquidity perspective. You can consider funds such as Axis Liquid and Aditya Birla Sun Life Liquid. Regular redemption requests usually take a day to be processed. Please note that the instant redemption facility offered by some fund houses on their website restricts the amount you can redeem to Rs 50,000 per day. If you can wait for a day, you can go through the regular redemption process and get the full money in one shot. There are no exit loads in liquid funds.”

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