Several individuals look forward to their retirement days. Why? Retirement is the time that allows individuals to do what their heart desires – take up on their hobbies and activities that didn’t find a place in their working life. No wonder it is referred to as the golden era of an individual’s life. However, everyone needs to face one harsh reality concerning retirement: your earnings might stop, but your expenses won’t. You might feel that your costs might decrease, but you must consider the rising costs of the health industry, effects of inflation, etc. One of the common types of investments that helps investors earn stable and guaranteed returns is fixed-income investment options. Though these investment options provide investors the safety and stability of investing in mutual funds, are they enough? Can your retirement portfolio depend entirely only on the returns generated by fixed-income investment options? This article aims to answer that question for you.


Equity funds have a higher potential of generating substantial returns over some time than fixed-income investment options. If you consider long-term returns, equity funds generate better tax efficiency than debt funds, and you can no longer overlook equities and equity-related securities as a significant contributor to your investment portfolio.

Why are fixed-income securities not enough to build your retirement kitty?

In the good old days, several savings schemes and fixed deposits (FD) successfully generated high single-digit returns to investors. Some plans even caused as high as early double-digit returns in some cases. These were the times when generating 10-12% assured returns per annum through savings certificate or PPF (public provident fund) or FDs was a reality. Of course, as you might know, this is no longer the case.

Today, these investment options generate fixed and assured returns at around 5-7% per annum, which is pre-tax. After tax returns might go down by a further 1-2% per annum. And the annual inflation rate in a growing economy like India is somewhat the same. In essence, you are left with almost nothing once you consider the tax aspects and the effect of inflation on your investments. As you might have calculated, investing in just fixed-income securities for your retirement portfolio might not fare well for you.

Enter equity

Equity is the solution if you wish to cater to your retirement needs without compromising your desired lifestyle. Experts suggest investing inequities highly at least up to two years before you decide to retire. As retirement portfolios usually have a higher investment horizon, this gives your equities ample time to adjust to market volatilities.

Once you are nearing your retirement, you can systematically transfer your funds in debt funds through systematic transfer plans (SWP). This helps you to preserve the wealth that you have accumulated until now. Debt securities are ideal for providing a cushion to portfolios in cases of uncertain events. It is a good idea to find the right balance between equities and debt securities based on your investment goals, investment horizon, and risk appetite. However, remember not to let go of equity as an asset class, even post-retirement. Happy investing!