Government Pension Investment Fund

Which is the Best Retirement Plan in India?

LIFE INSURANCE (endowment plans) – will offer you assured sum at retirement. But the returns they generate are or only 6-7%. A premium of Rs. 20000 per month will give you only Rs. 2 crore. Unfortunately most people are lured by the agents and take the worst decision of buying Life Insurance. The blunder they commit is mixing Insurance with investment. Buy Insurance is a good decision but go for term plan.

TERM PLAN Insurance – is a much better and economical option. A cover of Rs. One crore is available for rupees ten to twenty thousand per year. Check comparative premiums, claim settlement record, additional riders and go ahead. Younger the age of entry lesser is the premium.

GOLD is a good hedge for bad times plus it is a very good investment too. But the returns are not a straight line. Gold has appreciated 8 – 9 % over a long period.

SOVEREIGN GOLD BONDS (SGB) issued by RBI are a much better option than physical gold by virtue of interest @2.75% that one can earn over and above the capital appreciation. Total return is thus in the range of 10- 12 %. It is almost totally a risk free investment. It beats all other investments in safety and returns. These are issued by the Reserve Bank of India and offer host of advantages like; superior alternative to holding gold in physical form. The risks and costs of storage are eliminated. Investors are assured of the market value of gold at the time of maturity and periodical interest. SGB is free from issues like making charges and purity in the case of gold in jewellery form.  Interest is taxable at normal rates. Capital appreciation will be taxed as capital gains after adjusting for inflation (Cost inflation index). So one needs to pay this tax only if the price appreciation beats inflation.

SO CALLED RISKY INVESTMENTS: Shares generate a much better returns than fixed income instruments. But it is better to avoid investing directly in the shares and, instead, use Mutual Funds route.


Professional management. Qualified professionals assisted by research teams manage your money. Diversification. Diversification lowers your risk of loss by spreading your money across various industries and geographic regions. It is a rare occasion when all stocks decline at the same time and in the same proportion.

Affordability. A small investor may not be able to buy shares of larger corporations. Mutual funds generally buy and sell securities in large volumes which allow investors to benefit from lower trading costs. A small investor can invest even Rs.500 in a Systematic Investment Plan on a regular basis.

Tax benefits. Investments held for over 12 months are exempt from capital gains. Dividend income is Tax Free.

Liquidity. With open-end funds, you can redeem all or part of your investment any time you wish and receive the current value of the shares. Funds are more liquid than most investments in shares, deposits and bonds.

SIP – Rupee-cost averaging. With rupee-cost averaging, you invest a specific rupee amount at regular intervals regardless of the investment’s unit price. As a result, your money buys more units when the price is low and fewer units when the price is high, which can mean a lower average cost per unit over time so there is little to no impact of market volatility. You don’t need to speculate on timing the market. You can update/cancel SIP anytime. You can start as low as Rs. 1000 per month

Transparency. The performance of MF is reviewed by various publications and rating agencies, making it easy for investors to compare one fund to another. A unit holder gets regular updates, like daily NAVs, fund’s holdings etc.

Regulations. All mutual funds are required to register with SEBI (Securities Exchange Board of India) who regularly monitors them.

HISTORICAL RETURNS: from Mutual Funds.

Economic Times in its 8th June 2015 issue identified five top Mutual Funds who have been in existence since 20 years. Their 10 years returns have done quite well. 10 year period is fairly long to even out any chance fluctuations.