scorecardresearchThis retirement fund is an outlier with over 27% return in the last one year

This retirement fund is an outlier with over 27% return in the last one year

Updated: 12 May 2022, 01:31 PM IST
TL;DR.

Investing in retirement funds is a necessary exercise in financial planning. The corpus accumulated forms your financial backbone post-retirement. 

Investing in ICICI Prudential Retirement Fund - Pure Equity Plan - Direct Plan-Growth for a sizeable retirement corpus

Investing in ICICI Prudential Retirement Fund - Pure Equity Plan - Direct Plan-Growth for a sizeable retirement corpus

Saving for retirement should be an essential part of your financial planning. For this, many investors park their money in retirement funds hoping that the corpus accumulated would take care of their expenses later in the face of no income during old age. However, do all retirement funds avail their customers of similar returns? A look at the historical returns of some popular retirement funds reveals

Name of the fund One-year returnsThree-year returnsFive-year returns
ICICI Prudential Retirement Fund - Pure Equity Plan - Direct Plan-Growth27.66%44.08%18.46%
HDFC Retirement Savings Fund - Equity Plan - Direct Plan-Growth16.15%42.80%19.51%
ICICI Prudential Retirement Fund - Hybrid Aggressive Plan - Direct Plan-Growth10.84%29.16%13.37%
HDFC Retirement Savings Fund - Hybrid- Equity Plan - Direct Plan-Growth7.12%28.66%13.90%

Fund composition

The three-year average returns earned on investing in ICICI Prudential Retirement Fund - Pure Equity Plan - Direct Plan-Growth are higher than the category average. A holistic look at the fund and its average returns over five years reveal its portfolio being locked in 87.42 per cent equity fund holdings.

This fund invests in 28 stocks of which 70.55 per cent of the money is parked in large-cap investments, 7.15 per cent in mid-cap investments, and 1.31 per cent in small-cap investments with the remaining invested in other financial instruments.

The idea behind investing in this fund is to generate capital appreciation from a portfolio locked in equities and equity-related investment instruments. Currently, this fund holds 157.41 worth of assets under management and is benchmarked against NIFTY 50 - TRI as the primary index and NIFTY 500 - TRI as the secondary index. Since its inception, investors have earned 69.40 per cent returns from the money put in this fund.

The fund charges an expense ratio of 1.04 per cent, which is slightly higher than other funds in the same category. The fund has an inherent moderate risk factor, thus, prompting many risk-averse investors to choose it to fund their retirement needs.

Estimating possible returns

Assuming that an investor aged 40-years-old makes a SIP investment of 10,000 in this fund for 20 years.

The total invested amount: 24,00,000

Estimated returns on the amount invested: 2,26,90,520

Total value of the investment after 20 years: 2,50,90,520

The taxability factor

Since it is a retirement fund, any contribution up to 1.5 lakh every year towards retirement mutual funds is subject to tax exemption under Section 80C of the Income Tax Act. This means that the amount invested is deducted from the total taxable income to derive a net income that is now lower and would attract less tax imposition.

 

Disclaimer: This is not an investment advice. Please speak to your SEBI-registered investment advisor before investing. 

Article
Benchmarking mutual funds
First Published: 12 May 2022, 01:30 PM IST