Provident fund, the best investment tool for retirement
When it comes to retirement planning, the Provident fund is always considered one of the best investment tools for retirement planning. Especially if you are a corporate employee where your employer provides you company’s provident fund. In order to comply with the laws, a member of the fund (employee) is required to meet the conditions as following to receive tax benefits;
Resignation/does not mean withdrawing from the fund during employment at least 5 years of fund membership 55 years old or older, the Provident fund is considered as one of the best potential investment tools that encourage employees to save up for their life after retirement. In other words, retiring with quality of life. Besides, the provident fund also acts as a long-term saving vehicle by deducting 2%-15% from employee’s monthly salary and invest those amounts as employee’s contribution. Thus, employees can rest assured that they will have financial security and stability for life after retirement. Dollar-Cost Average, or DCA, is the method to invest consistently in the specific time period with the same allocated amount rather than invest all amount in one time to avoid market volatility and provide investors the opportunity for better returns.
There are also contributions from the employer, which will be contributed to the fund each month until the employee retires or no longer the fund member. However, the rate of employer’s contribution will depend on the company policy but usually increases overtime by employee’s years of employment. In other word, the employer will help you save up for your retirement.
Investing in a provident fund is an attractive saving tool for fund members (Employees) because it is suitable for those who do not have time to study and invest by themselves. Principal Asset Management utterly understands the need of fund members (Employees). Thus, Principal Asset Management wishes to propose a “Principal Target Date Retirement Fund” which is designed to help fund member to enjoy investment more while their investment capital will be managed closely by the fund manager. Employees set their preferred retirement age. Then, the fund manager will automatically arrange the appropriate investment policy and asset allocation to suit the member’s age and also suitable for the current market situation by using the portfolio rebalancing technique.
The portfolio’s asset allocation and risk will be adjusted to suit the member’s age. This will help fund members to have an appropriate level of investment risk throughout their investment life. Decreasing the portion of risky assets investment, e.g., stocks, and switching to invest more in fixed income to help maintain initial investment and to ensure that fund members can retire securely as expected.
On the other hand, the “Principal Target Risk Fund” is also designed to provide appropriate investment plans for employees who already plan out for retirement. Investment policies for “Principal Target Risk Fund” are classified into 5 categories by risk levels, starting from Conservative investment policy to Do-It-Yourself policy. Conservative policy is suitable for fund members with low risk-tolerant. The portfolio allocation will be 80% in low-risk asset, e.g., short term fixed income and 20% in fixed income, to help maintain initial investment. The Do-It-Yourself policy will allow fund member to allocate their investment assets and select their investment portions, including investment in risky assets, e.g., stocks up to 100% of their portfolio.
However, investors must be aware that they may receive a lower return when the financial market is volatile. “Principal Target Risk Fund” is suitable for those who have time to invest and understand the market conditions and risk factors before making an investment. Thus, “Principal Target Date Retirement Fund” is more preferable for those who do not have time to invest by themselves.
Retirement planning is very important, but it is often being ignored. The best time to start planning and investing for retirement is now. The more you invest and the earlier you start your retirement planning. Your capital will have much more time and potential to grow. Investing in provident funds is one of the most suitable investment tools for retirement that cannot be overlooked.
Disclaimer
Investors should understand product characteristics (mutual funds), conditions of return and risk before making an investment decision.
For further study in Provident Fund, click https://www.principal.th/th/provident-fund
Contact Principal at Tel: 02-686-9595
www.principal.th
