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Long-term wealth planning goes a long way in helping one achieve their financial goals, which may include pivotal stages in life such as retirement. Although many investors may already know the importance of starting early in creating dependable wealth over the long term, they may not always understand the discipline it takes to stay on course. It is only careful planning and investment that lead to a sizeable return that can support one’s post-retirement life just as effectively as their working years.
In this special series, titled ‘Seekho Paiso Ki Bhasha’ (Learn the Language of Money), Kotak Mutual Fund MD Nilesh Shah simplifies complex market concepts in a candid and accessible way.
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“There's no such thing as a free lunch… Risk and return go hand in hand. Over the long term, risk-takers earn a sizeable reward, which then secures a financially healthy life after retirement,” says the veteran fund manager.
“Money is not everything in life. Money is not important. But make sure that you’ve made enough money before you make such statements,” says Shah.
Smart investing is what you need for retirement planning; simply saving may not be enough.
Only savings may not do what it takes to secure a financially sound and pleasant retirement. Growing needs and an improving lifestyle require thorough and timely financial planning for the day your paychecks stop--i.e., retirement. What you really need is a smart investment strategy that helps your money grow.
Mutual funds offer a simple yet powerful way to create a long-term wealth pool. With the right mix of funds based on your goals and risk appetite, one can steadily build a financial cushion that beats inflation and supports your lifestyle even after your regular income stops.
It’s time to invest, not just save.
“Wise savings and wise investments are like your most dependable companions… There was a time when your family was your retirement solution. As we move from a joint to a nuclear family setup, with the value system evolving, it is essential to invest smartly to achieve financial independence,” says Shah.
Ambitions need to be matched with the right investments
Financial goals come in all shapes and sizes, but it is paramount to back your ambitions with apt financial planning and smart investments.
“Smart investing is the only answer to turning financial dreams into reality. Only the right investing can make that happen,” says Shah.
“Some people invest in PPF while others go with equity-linked savings schemes, but the gap between these instruments is huge. If you compare their returns, one is at 8 per cent while the other is at 14 per cent in 25 years,” highlights the veteran fund manager.
“You can imagine the difference that a single decision can bring about in your investment journey. A gap of 6 per cent makes a huge difference over longer periods of time,” adds Shah.
*the returns mentioned above are for understanding purposes and shall not be construed as any guarantee. Investor may consult their financial advisors before taking any financial decisions.
A balanced investment goes a long way in creating wealth
An aspect often neglected in investing is the importance of prioritising savings over expenses. This small move creates a big difference in the outcome when it comes to long-term wealth building.
“Early investors often think ‘income minus expenses equals savings’. Simply replacing this equation with ‘income minus savings equals expenses’ can change the way your investments work. The earlier you start, the better compounding you get. Striking a good balance between savings and investments is important for planning post-retirement finances. At times, the investments offer limited room to beat inflation. Savings not backed with effective investing can hinder growth within the desired timeframe,” explains Shah.
“While retiring, people become ultra-conservative with their investments. Every investor should thoroughly focus on a real return--one that outperforms inflation. Failing to do so is like holding ice on a hot afternoon… So, the first and foremost is to strike a balance between savings and investments. And secondly, one shouldn’t lose their appetite for risk post-retirement,” adds the market guru.
Importance of SIP | How to use it to plan retirement?
For effective retirement planning, one needs a corpus big enough to support post-retirement life with financial security. A systematic investment plan (SIP) helps one reach that goal by taking one small step at a time in the form of instalments into the desired mutual fund scheme.
The country’s GDP and market capitalisation have grown exponentially over the past few years.
“In the next 20–25 years, the country’s economy would have grown to $30 trillion from the current $4 trillion. If we work together, it might go beyond that and much faster… Growth is imminent. This period will see a manifold increase in the wealth-creating opportunity compared to the past 25–30 years. It is entirely up to investors to participate in India’s growth story. SIPs are the best way to participate in that regard,” concludes Shah.
Source: The Economic Times
The ‘Seekho Paiso Ki Bhasha’ series aims to break down investment concepts into simple, relatable terms.
An investor education and awareness initiative by Kotak Mahindra Mutual Fund.
Visit: https://www.kotakmf.com/iap-disclaimers/ to know more about the process to complete a one-time Know Your Customer (KYC) requirement to invest in Mutual Funds, procedure w.r.t. change of address, phone number, bank account details, etc. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (www.sebi.gov.in/intermediaries.html). For any queries, complaints and grievance redressal, investors may reach out to the AMCS and/or Investor Relations Officer. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolution given by AMCS. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.
Kotak Mahindra Asset Management Company Limited (KAMAMC) is not guaranteeing or promising any returns/futuristic returns.
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