I am 35 and can save Rs.20, 000 per month. I already have two fixed deposits (FDs) of Rs.1 lakh each. Should I make an FD for Rs.20, 000 each month to save towards my retirement? - Himanshu Soni, Mumbai
You have some years to go before you retire, which means that you can and very much need to have exposure to equity to grow your savings and investments. If you manage to save Rs.20, 000 each month consistently for the next 25 years, you would have put aside Rs.60 lakh towards your retirement. But, if this sum is invested every month in a mutual fund, which earns even a conservative 10 per cent return, you will amass a corpus of Rs.2.46 crore over the same time period.
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Your FDs do not seem to be the type to pay out more than 10 per cent interest and you also should factor in the impact of inflation and tax outgo on the interest earned on the FDs. To make the optimum use of your monthly savings, invest this money in a diversified equity mutual fund(s), which has the potential to earn higher than 10 per cent return in the long run to beat inflation and is also tax efficient in a manner that the proceeds from the investments made by you are tax free.
