Safe growth for re­tire­ment sav­ings

The scheme has de­liv­ered a com­pound an­nu­alised re­turn of 16% since its launch


The re­tire­ment plans of­fered by mu­tual funds are struc­tured to meet the in­vest­ment needs of in­vestors plan­ning for their re­tire­ment based on their risk pro­file and age group.

AMCs such as Tata, Franklin, UTI, Re­liance and HDFC of­fer re­tire­ment plans with dif­fer­ent op­tions, across eq­uity and debt port­fo­lios.

These plans have a lock-in pe­riod of five years (or till re­tire­ment age, which­ever is ear­lier). Un­der its Re­tire­ment Sav­ings Fund, Tata Mu­tual Fund of­fers three choices of as­set- al­lo­ca­tion plans to in­vestors for re­tire­ment plan­ning — Tata Re­tire­ment Sav­ings Fund — Pro­gres­sive Plan, Mod­er­ate Plan and Con­ser­va­tive Plan. Each plan fol­lows a dif­fer­ent in­vest­ment ap­proach to cater to the needs of dif­fer­ent in­vestors at dif­fer­ent stages of their life­time.

Tata re­tire­ment sav­ings plans, too, have a lock-in pe­riod of five years.

For the mid­dle-aged

Tata Re­tire­ment Sav­ings Fund Mod­er­ate Plan is struc­tured to suit in­vestors in the 45-60 year age bas­ket with medium risk pro­file, aim­ing to pro­vide both growth and pro­tec­tion.

It in­vests around two-thirds of its port­fo­lio in equities and the re­main­ing in debt.

The reg­u­lar plan of Tata Re­tire­ment Sav­ings Mod­er­ate Plan re­cently com­pleted seven years.

It has de­liv­ered a com­pound an­nu­alised re­turn of 16 per cent since its launch.

The fund has also out­per­formed its re­spec­tive bench­marks and cat­e­gory in var­i­ous time-frames.

Though it comes un­der the so­lu­tion- ori­ented cat­e­gory, con­sid­er­ing the fund’s higher eq­uity al­lo­ca­tion, it can be com­pared with ag­gres­sive hy­brid funds.

The scheme has de­liv­ered 13, 19 and 16 per cent an­nu­alised re­turns over three, five and seven years, re­spec­tively, while the ag­gres­sive hy­brid fund cat­e­gory posted 10, 13 and 14 per cent re­turns dur­ing the same pe­ri­ods.

Port­fo­lio com­po­si­tion

The fund has main­tained an eq­uity-debt ra­tio of 75:25 (on av­er­age over the past three years).

On the eq­uity side, the scheme chooses high-qual­ity growth stocks at rea­son­able prices based on five pa­ram­e­ters — ef­fi­ciency in use of cap­i­tal, gover­nance lev­els, earn­ing growth prospects, valu­a­tion and liq­uid­ity. It cherry- picks stocks across mar­ket caps and sec­tors.

How­ever, more than 60 per cent of its eq­uity port­fo­lio is tilted to­wards large-cap stocks. This has helped the fund de­liver sound re­turns across eq­uity mar­ket con­di­tions.

On the fixed-in­come port­fo­lio, till Jan­uary 2018, the fund pre­ferred to hold only gov­ern­ment se­cu­ri­ties and CBLO (col­lat­er­alised bor­row­ing and lend­ing obli­ga­tion) in­stru­ments.

The fund then added high­es­trated cor­po­rate bonds in its port­fo­lio. As of Novem­ber 2018, the al­lo­ca­tion to cor­po­rate bonds was 18 per cent.

The av­er­age ma­tu­rity of the debt port­fo­lio is around a year.

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