A retirement mutual fund scheme that rejigs debt and equity allocation with age
The new fund from Edelweiss adjusts equity and debt components to reduce risk with age.
The retirement funds currently in the market are typically hybrid in nature, offering a five-year lock-in period and Section 80C tax benefit, but most of them are not flexible when it comes to asset allocation. This means that they do not facilitate switching between equity and debt to ensure lower risk with age. With very few plans, such as the Tata Retirement Savings Fund providing the auto-switch option to reduce equity component with age, there is ample opportunity for new funds to fill in this space.
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Source: Edelweiss Asset Management Internal Research Survey was conducted among 1,300 respondents
With this in mind, Edelweiss Asset Management has launched the Retirement Plan. “Investors do not understand the crucial role of asset allocation in retirement planning. This plan helps in age-based asset allocation,” says Radhika Gupta, CEO, Edelweiss Asset Management. The plan provides exposure to a diversified portfolio with an in-built asset allocation mechanism. This means that even as you continue with your SIPs, the plan gradually shifts the portfolio toward lower-risk investments based on age and life stage.
The plan comes with two asset allocation options: ‘Auto’ and ‘My Custom’. While the former provides a predefined asset allocation at every age, the latter offers flexibility to customise equity and debt allocation as per the risk appetite and tenure of investment. This may be a good hands-off option to explore for investors planning to save for retirement.