Why it is important to plan Retirement Corpus through MF instead of a Guaranteed Life Insurance Savings Plan
Let us have an example of a 30-year-old person, planning for Retirement Corpus, by investing in a guaranteed savings plan say only for 5 years (with a premium of Rs.2.5 lakhs) per year and at the end of 30 years, his corpus will be Rs.63.5 lakhs @ 6% CAGR whereas in a Diversified Equity fund if he contributes only 2.5 lakhs per annum for the next 5 years and stays invested for 30 years, he can experience wealth creation with Rs.4.98 crore corpus with investment yielding @14% CAGR.
Life insurance should be considered only for RISK PROTECTION and not for Savings and for each long-term financial goal, Equity Mutual funds can deliver much higher returns which can beat inflation and provide the desired corpus.
Equities are only riskier in the Short Term (up to 3 -5 years) and Long term Compounding returns can be experienced only in equity-oriented investments in a growing economy like India.
Having said that, Term Life Insurance has to be considered in each individual’s life (breadwinner) of the family as it is a REPLACEMENT INCOME to the family in case of the early demise of the earning member.
To plan your corpus effectively based on your Risk Profile and Time to goal, consult a qualified Financial Planner.
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