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Best mutual funds for retirement planning

Written by - Marisha Bhatt

January 12, 2022 10 minutes

Retirement planning is all about determining retirement income expectations and narrowing down the means to achieve the targeted income. Since retirement planning is essentially planning for the long-term, mutual funds fit the bill as far as investment options for meeting the income goals are concerned. However, one cannot invest in any available mutual fund category to generate the desired income. The best mutual fund investments for retirement planning are those that offer diversification to the portfolio and reduce the risks involved.

The key to good retirement planning through mutual funds is to ensure right asset allocation. Often, while selecting the best mutual funds for retirement planning, investors ask these questions, where to invest, how to invest, how much to invest, etc. Here, we will address these questions and share some of the best mutual funds that investors can choose for retirement planning.

How to select mutual funds for retirement planning?

As a first step, investors must identify the suitable mutual funds and the proportion in which to invest in each within the overall portfolio. There are various mutual fund categories ranging from long-term to short-term and high-risk and low-risk. An investor can choose a ratio in which to assign funds into mutual fund categories. While deciding the ratio, age is one of the most significant aspects to be considered. 

Mutual fund selection should change according to the different life stages of an investor. For a young investor, it makes sense to invest in equity-oriented funds as compared to a middle-aged investor who should try to choose a hybrid fund with a mix of equity and debt investments. Similarly, as one grows older and nears retirement, debt mutual funds become the safer choice.

Mutual fund selection also depends on individual risk-taking capacity. Often, young investors have a higher risk tolerance and therefore invest a significant portion in equity funds as compared to older investors who would prefer debt funds. 

Which mutual funds to invest in for retirement planning?

Here, we will cover some of the top-performing mutual funds for different investment time horizons. Investors can select these based on personal investment time horizon and by weighing their risk appetite against the mutual fund’s risk rating.

Mutual fund options for retirement planning if you are in the 50s and 60s

If your age falls within the 50-60 years bracket, you are almost near your retirement or may have already retired. By this time, you may have already formed a retirement corpus but if you would like to add to this corpus, you can invest in short-term mutual funds. These funds are mostly debt oriented and allow liquidity while providing sufficient income potential. Since debt funds carry lower risk levels, you can comfortably invest in these to ensure continued income while retiring. 

Short-Term Funds

Short-Term Mutual funds are open-ended schemes that have a maturity period between 15 to 91 days. The maturity period generally varies as per the maturity period of the underlying assets or investments. These funds primarily invest in high-quality assets that carry low risk. These make for an ideal investment choice for those who are risk averse and require higher liquidity. 

  1. Kotak Bond Short Term Fund
About the Fund 

Kotak Bond Short Term Fund is a debt mutual fund scheme that invests 96.46% of its corpus in debt. Of this, 42.28% is allocated to Government securities and 54.18% is invested in very low-risk securities. The fund’s performance has consistently beaten the category average returns. 

Inception DateMay 02, 2002
Expense Ratio (Direct)0.34%
Fund ManagerDeepak Agrawal
Suitable ForInvestors who want to remain invested for 1-3 years and are willing to explore alternatives to bank deposits.

Historical Returns of the Fund (annualised)

  1. IDFC Bond Fund-Short-Term Plan
About the Fund 

This scheme from IDFC AMC aims to generate returns through investments in debt and money market instruments. The fund portfolio is primarily a mix of short duration debt and money market instruments. The average portfolio maturity is anchored around 2 years. The fund aims to generate optimal returns over the short to medium term.

Inception DateDecember 14, 2000
Expense Ratio (Direct)0.30%
Fund ManagerMr. Suyash Choudhary
Suitable ForInvestors who are looking to diversify their portfolio with a mix of short duration debt and money market instruments. The average portfolio maturity does not exceed around 2 years.

Historical Returns of the Fund (annualised)


Mutual fund options to invest while in 40s and 50s

If you are currently in the age group of 40-50 years, retirement is not far off and you will have limited time to ensure sufficient funds are available for retirement. Therefore, in this life stage, it makes sense to opt for medium duration funds. These funds can be a mix of equity and debt or equity funds that carry medium to low risk levels. 

What are Medium Term Funds?

Medium duration mutual funds can be large-cap equity funds. This category can also include aggressive hybrid funds that mainly invest in a combination of equity and debt securities. These are ideal investment options for those who have a medium to low risk appetite, especially individuals who are between 40-50 years of age and planning for retirement.

  1. ICICI Prudential Bluechip – Large cap
About the fund

ICICI Prudential Blue chip Fund is an open-ended large-cap equity fund which aims to provide growth and stability to investors. It primarily invests in blue chip stocks of various sectors with an objective to provide diversification benefit to investors. 

Inception DateNovember 24, 2009
Benchmark NameNifty 50
Fund ManagerJitendra Arora
ObjectiveTo provide long-term capital appreciation through an equity portfolio that is mainly invested in large-cap stocks.
Historical Returns of the Fund (annualised)
  1. Axis Blue chip – Large cap
About Fund

Axis Blue chip Fund is an open-ended large-cap equity scheme ideal for investors who are looking for capital appreciation in the medium to long run. It offers portfolio diversification with a combination of equity and equity-related instruments, predominantly focused on large-cap firms.

Inception DateJanuary 1, 2013
Benchmark NameNifty 50 Total Return
Fund ManagerShreyash Devalkar
ObjectiveLong-term capital appreciation through portfolio diversification comprising equity and related securities of large-cap firms.
Historical Returns of the Fund (annualised)
  1. Canara Robeco Equity Hybrid Fund – Aggressive hybrid
About the Fund

The scheme’s objective is to maintain a balanced portfolio to provide high annual returns and capital appreciation to investors. The fund invests 73.65% in Indian stocks of which 47.18% is invested in large-cap stocks. 14.2% is allocated to mid-cap stocks and 2.68% in small-cap stocks. The fund also invests 20.85% in Debt instruments of which 9.97% is in Government securities, 10.88% is invested in very low-risk securities.

Inception DateJanuary 1, 2013
Benchmark NameCRISIL Hybrid 35+65 Aggressive Total Return Index
Fund ManagerShridatta Bhandwaldar,Avnish Jain, Cheenu Gupta
Expense Ratio0.78%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception
  1. Mirae Asset Hybrid Equity Fund
About the Fund

The fund aims to generate capital appreciation combined with regular income from a portfolio mix of equity & equity related instruments and debt and money market instruments. The fund invests 74.62% in Indian stocks of which 47.29% is in large-cap stocks, 12.91% is in mid-cap stocks and 4.96% in small-cap stocks. 12.5% of funds are invested in Debt of which 6.56% is in Government securities, 5.94% in funds that invest in very low-risk securities.

Inception DateJuly 29, 2015
Benchmark NameCRISIL Hybrid 35+65 Aggressive Total Return Index
Fund ManagerHarshad BorawakeMahendra Kumar Jajoo Vrijesh Kasera
Expense Ratio0.45%

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception

Mutual fund options to invest while in 20s and 30s

If you are in your 20s or 30s, retirement is far off and you can have a longer duration to plan your investments for generating income/savings for retirement. Therefore, you can opt for long-term funds since these are equity-inclined and have chances of performing well in the long run. 

What are Long-Term Funds?

Long-term mutual funds are ideal for meeting one’s financial requirements of distant future goals, like higher education, buying a home, retirement-related expenses, etc. Therefore, young investors who are looking to grow their wealth for retirement can invest in long-term mutual funds. Long-term mutual funds usually come with a time horizon of more than 10 years and are equity focused.

  1. L&T Nifty 50 Index Fund – Growth – Direct Plan
About the fund

L&T Nifty 50 Index Fund belongs to the L & T Mutual Fund umbrella. This scheme was launched on 15-Apr-2020. It adopts a passive investment strategy and invests in stocks that comprise the Nifty 50 index. 

Inception DateApril 15, 2020
Benchmark NameNifty 50
Fund ManagerPraveen Ayathan
ObjectiveThe primary objective is to achieve returns in tandem to the Total Returns Index of Nifty 50 index. The scheme aims to minimise performance difference between its returns and the benchmark index.

Historical Returns of the Fund (annualised)

Since Inception
  1. HDFC Index Fund – Direct Growth – Sensex Plan
About the fund

HDFC Index fund – Sensex plan is an open-ended scheme that replicates S&P BSE SENSEX Index. The Scheme is passively managed with stock investments in a proportion that is similar to their weights in the S&P BSE SENSEX Index. 

Inception DateJanuary 01, 2013
Benchmark NameS&P BSE SENSEX
Fund ManagerMr. Arun AgarwalMr. Krishan Kumar Daga
ObjectiveTo fetch returns that are equivalent to the performance of the S&P BSE SENSEX Index, subject to tracking errors.

Historical Returns of the Fund (annualised)

1-Year2-Year3-Year5-YearSince Inception

What is the best way to invest in mutual funds for retirement planning?

For the purpose of retirement planning, an investor can invest in mutual funds either as a lump sum investment or through Systematic Investment Plans (SIPs). Most experts suggest the second mode of investment since it helps in inculcating good financial discipline and allows investment to be spread over a longer time period. This provides exposure to different market conditions. Most mutual funds allow a minimum SIP investment amount that can be as little as Rs. 500. An investor also has the option of switching between equity and debt investment within a mutual fund investment done through systematic transfer plan.


Mutual funds make for an ideal investment choice for retirement planning since they offer a variety of investment categories as per risk, time, and expected returns. Investors must carefully carry out retirement planning to ensure that they are financially covered after attaining retirement. 


  1. Is investing in mutual funds good for retirement?
    Mutual funds offer a wide range of options to investors depending on their risk appetite, investment horizon, and also ability to invest. They can make for an ideal addition to an investment portfolio for retirement because of the diversity offered and ease of investment for new investors.
  1. How to invest in mutual funds?
    You can download the Fisdom app on your smartphone to begin investing in mutual funds. The app has easy to follow steps for investing and a wide range of fund options to select from.
  1. Are mutual funds tax free?
    Mutual fund returns are taxable unless one invests in ELSS or equity linked savings schemes. The returns are taxed differently depending on whether they are short-term gains or long-term capital gains.
  1. Can I exit from mutual fund investments when I like?
    Except for ELSS, an investor can exit a mutual fund investment whenever he/she likes, depending on personal financial goals, comfort levels, and also market scenarios. ELSS or equity linked savings schemes have a lock-in period of 3 years, during which period an investor cannot exit the investment.
  1. I will retire after 20 years, where should I invest now to save for retirement?
    If you are planning to retire after 20 years, you can either invest in an equity mutual fund or a hybrid mutual fund with a mix of debt and equity exposure. The investment choice will depend on your risk appetite, however, it makes sense to go for medium risk investment options to ensure limited losses in case of market downturns.

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