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For retirees and those nearing retirement, mutual funds offer choices of asset allocation plans based on their risk profile. Tata Retirement Savings Fund - Conservative Plan is one such scheme, structured to suit retirees with low to medium risk profile.
Building your own retirement kitty is a must in a country like India where there is no social security to fall back on. At present, there is a wide range of both guaranteed and market-linked retirement products that can help you build your nest egg.
Mutual funds, too, offer such retirement products that are structured to suit the investors’ needs based on their risk profile and life stage.
Tata Retirement Savings Fund - Conservative Plan is one of the three retirement plans offered by Tata Mutual Fund. It is structured to suit the needs of conservative investors. These are open-ended retirement solution-oriented schemes that have a lock-in of five years or till retirement age (whichever is earlier). Despite the lock-in feature, Tata retirement plans do not offer Section 80C benefits. However, these funds score on consistency, with higher risk-adjusted returns and high-quality portfolio.
The fund’s objective is to provide capital protection by investing at least 70 per cent of its net assets in debt and up to 30 per cent in equities.
Investors looking to shift their retirement corpus from relatively risky assets to low-risk investment options can consider the fund (given its marginal allocation to equity).
Performance
Tata Retirement Savings Fund - Conservative Plan has outperformed the schemes that have similar attributes (six schemes allocate 20-30 per cent to equity) in the category and also conservative hybrid funds across all time-frames.
The scheme has delivered a compound annual growth rate (CAGR) of 11 per cent, 5 per cent, 8 per cent and 10 per cent returns during one, three five and seven years, while the funds with similar attributes in the (retirement solution-oriented) category posted 8 per cent, 5 per cent, 7 per cent and 10 per cent returns, respectively.
Meanwhile conservative hybrid funds delivered 7 per cent, 4 per cent, 6 and 8.5 per cent respectively.
Performance measured by the five-year rolling returns calculated from the past seven years’ NAV history show that the fund delivered a CAGR of 10 per cent, while the conservative hybrid funds category clocked 9 per cent.
Portfolio
The fund has maintained an equity-debt mix of 29:71 (on average, over the last three years). Of the equity portion, one-third is in mid-cap stocks.
This has helped the fund deliver relatively high returns during rallies.
On the fixed-income portfolio, the fund has played both the accrual and the duration theme well. The portfolio’s average maturity is 3.8 years and yield-to-maturity is 5 per cent (as of August 2020).
The debt portion is now invested only in G-Secs (51 per cent) and high-rated corporate bonds (around 13 per cent in only AAA rated bonds).
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