Passive equity funds in retirement

You can feel the wind in your hair and smell the Earth beneath your feet. At last, you have approached retirement and it's time to reap the rewards of all those years of work.

With a significant portion of your retirement corpus invested mostly in fixed deposits and maybe other fixed-income instruments, you are confident of making ends meet. However, don't get lulled by the steady income stream.

You will still have to contend with inflation. In the initial few years, your interest income might be more than your cost of living. But inflation will soon catch up with you. Moreover, there could be unforeseen circumstances that can drive up your bills!

To avoid such outcomes in your golden years, you may allocate a portion of your retirement savings to equity as per your risk appetite. While you will have to contend with short-term gyrations, exposure to equity may allow you to beat inflation blues over the long term subject to risk factors.

But isn't stock picking difficult? Absolutely. To avoid that challenge and gain exposure to equity, passive funds can be of great help.

Passive funds simply track an underlying index and seek to generate returns as per that. They comprise index funds and exchange-traded funds/fund of funds.

For instance, the Nifty 50 Index consists of India's biggest listed companies in terms of market capitalisation. By investing in passive funds tracking such an index, you shall get exposure to the stocks which are part of the index.

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