Top 10 Retirement Mutual Funds

Top 10 Retirement Mutual Funds

Top-performing retirement mutual funds have delivered 15% annualised returns in the last 5 years, nearly twice the returns from Provident Fund

Top 10 Retirement Mutual Funds financial planning investment 30stades

Saving and investing for retirement and old age is an essential component of financial planning. For many working and salaried professionals, creating a retirement fund is the prime purpose of savings and investment during their working life. There are many ways to create retirement funds.

The oldest and the most common is the employee provident fund (EPF) where a fixed portion of the basic salary or pay is invested every month in fixed-income instruments such as government bonds and the fund offers a fixed rate of interest or return every year. This is the most secure and the least risky way to save for one’s retirement.

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The EPF is however only available to a small fraction of the working people — those who are part of the organised sector and work in the public sector or big companies in the private sector. The majority of workers, self-employed and those working on contract have to save and invest for their retirement.

Secondly, the monthly contribution and the annualised 8.5 percent interest on the provident fund could be insufficient for many salaried people given the rising cost of living, especially medical care for the elderly. 

The expected return provided by PF could also be insufficient for those with special financial goals such as the need to build a family home, fund a wedding in the family or children’s higher education. In these situations, you will need to save and invest over and above the PF limit.

Also Read: Five golden rules for saving & investment from your first salary

One of the best ways to create a corpus for old age is to invest in a retirement fund offered by various mutual funds. There are now dozens of retirement funds that offer all kinds of investment styles and options to investors. However, all retirement funds can be clubbed into three boxes – aggressive or equity-only funds, conservative or debt and fixed income-only funds and hybrid funds that only invest in both equity and debt instruments in a certain proportion. 

While equity-only funds score on returns, debt-only retirement funds offer the predictability of a provident fund. Hybrid funds offer a middle ground and try to achieve a balance between risks and returns. 

A smart option is to spread your funds in a basket of 4-5 best funds across all all-equity and hybrid retirement funds to minimise the downside risk. The top-performing equity-oriented retirement funds have delivered 15 percent annualised returns in the last five years, nearly twice the PF returns.

Here are ten retirement funds that have offered the most consistent returns in the last five years or since their inception (in the case of younger funds). We have only considered growth plans in our analysis. All data has been sourced from the ICRA Analytics Mutual Fund database.

1. SBI Retirement Benefit Fund – Aggressive Plan is the top-ranked fund on our list. The equity-oriented fund has been a top performer with 23.19 percent annualised returns since its launch in January 2021 and 12.95 percent returns in the last 12 months. The fund continues to beat its peers in 2022 as well.

Also Read: Five simple ways to invest & grow your money in 2022

2. HDFC Retirement Savings Fund -Equity Plan is at the second spot on our list with 14.07 percent annualised returns in the last 5-years and 13.13 percent returns in the last six months. One of the oldest funds in the category with assets under management of around Rs 2300 crore, it also scores high on risk parameters such as standard deviation and Sharpe ratio.

3. SBI Retirement Benefit Fund – Aggressive Hybrid Plan is next on our list with 20.04 percent annualised returns since its inception and 12.11 percent returns in the last six months. As the name suggests, the fund invests 75 percent of its assets in equity and the rest in top-rated bond and fixed-income instruments offering a good balance of high returns with low volatility and downside risks.

Also Read: Four steps to selecting the right mutual fund

4. ICICI Prudential Retirement Fund – Pure Equity Plan is fourth on our list with 17 percent annualised returns since its launch in February 2022 and category-leading 14.15 percent returns in the last 12 months. It’s a small fund with an AUM of Rs 176 crore but scores high on risk parameters such as standard deviation and Sharpe ratio.

5. HDFC Retirement Savings Fund – Hybrid – Equity Plan is the fifth spot in our list with 11.31 percent annualised returns in the last five years and 9.05 percent returns in the last six months. The fund invests two-thirds (67 percent) of its AUM in equity – mostly large-cap stocks and the balance one-third in bond and fixed-income instruments. This makes it a low-risk fund in its category.

Also Read: Five things to consider before buying life insurance policy

6. ICICI Prudential Retirement Fund – Hybrid Aggressive Plan is next on our list with 12.5 percent annualised returns since its inception and 6.8 percent returns in the last six months. It’s a hybrid fund with 77 percent exposure to equity – mostly large-cap index stocks while the rest has been invested in bonds and other fixed-income instruments.

7. Tata Retirement Savings Fund -Progressive Plan is next on our list with 14.4 percent annualised returns since its launch and 16 percent annualised returns in the last 5 years. One of the oldest schemes in the category with an AUM of Rs 1250 crore, it’s an equity-oriented scheme with 97 percent of the funds invested in a mix of large-cap, mid-cap and small-cap stocks.

Also Read: Five ways to grow your money during high inflation 

Other top-ranking retirement funds in our list include Tata Retirement Savings Fund -Moderate Plan – (15.35 percent annualised returns in the last 3 years); Nippon India Retirement Fund – Wealth Creation Scheme (13.94 percent annualized returns in the last 3 years) and Aditya Birla Sun Life Retirement Fund – The 30s Plan (12.83 percent annualised returns in the last 3 years).

Happy Investing!

(Disclaimer: This article is for information purpose only. Readers are advised to consult a certified financial advisor before making investment in any of the funds or securities mentioned above.)

(Karan Deo Sharma is a Mumbai-based finance and equity markets specialist).

Also Read: Retirement planning: 5 tips to retire rich

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