Several Indians lost their savings in the Harshad Mehta scam of 1992. Since then, many have completely avoided investing their money in any kind of scheme. Recently however, mutual funds have become fairly popular in the country. They are fairly safe investments, and the investors are continuously informed about how their money is doing, and where it is being invested. This has led to several mutual fund companies being set up in India that employ professionals to look after the money their investors hand them. A mutual fund pools together money from a large number of small investors, and invests in the big market. This gives investors better returns on smaller amounts of money.
Pension plans are a new trend in mutual fund plans. While companies like UTI MF and Franklin Templeton MF have had pension plans in place for around 15 years, the giant company Reliance MF recently jumped on the bandwagon. The aim of all these pension plans is to give the investor aggressive equity opportunities. The Reliance Pension Plan in particular will invest more than 65% in equities, and 35% or less in money market and debt securities. The aim is to create wealth in the long-run. On the other hand, the pension plans offered by UTI MF and Franklin Temple ton invest only 40% in equities, and the rest of the money is invested in fixed income instruments. However, if you do invest with Reliance MF, and choose to leave the fund before the age of 60, you will be required to pay a 1% exit fee.
The scheme also has a five-year lock in period, but this shouldn’t be an issue as it is a long-term financial plan, with the aim of being financially secure at retirement. The youth are being encouraged to start investing at an early age, so that they can enjoy a happy and secure retired life. People are also being made more aware of the flaws of the Employees Provident Fund (EPF) and the Public Provident Fund (PPF), as the funds received may not be enough for retirement. The key to a good investment is to put the retirement money in high-yielding asset classes to ensure better returns. There are certain tax benefits that investors can avail of while putting their money into retirement funds. While all the mutual fund plans have their own merits and demerits, late starters who are already in their 50’s would find it easier to invest in the Reliance MF plan, as they would receive higher returns. On the other hand, those who would prefer to invest in debt-oriented plans can put their money in the UTI MF or Franklin Templeton MF plans. At the end of the day, it is important to be aware of all the terms and conditions of an investment plan before you put your money down.