Every stage of life is special, including your 40s when you would most likely have built some corpus for yourself. What comes with the 40s are the additional responsibilities of meeting the day-to-day needs of your family besides your own. The investment strategy might differ from thereon as the risk appetite might lower a bit. So, if you’re in your 40s and want to know how to move ahead with investments, we’ll tell you the same here. Let’s begin!
Investment Planning During the 40s
The investment planning would greatly depend on the corpus you may have accumulated till now, your current obligations, and the amount you want to have at retirement. The obligations could include the monthly school fees, rent/home loan EMI, food, household, travel & maintenance expenses, etc. Given the rise in obligations now compared to 10 years ago, you need to change your equity and debt allocations. Let’s check the same below.
Look to Offload Equity Allocations by 5-10%
At such times, you want a fixed sum of money available with you to meet the obligations mentioned above. So, if you’ve been exposed 85-95% to equities, reduce it to 80-85%. Create space for further investments in debt instruments and bank deposits by reducing equity holdings this way. Maintain this asset allocation till you reach 50.
Investment Strategies from 50s Till Retirement
The risk appetite may taper off even more upon reaching 50. The job prospects may not be that bright if you don’t grab the top position till that time. Although we hope exactly the opposite for you. If things do turn out the way as feared above, reduce equity holdings further by 5-10% to 70-75%. Continue with this investment strategy till you’re 55-58. Hope you will be very close to your retirement corpus. Offload the entire or a maximum portion of your equity holdings to prevent your corpus from any more market fluctuations.
Equity & Debt Investment Options
Since the whole investment plan is from the 40s, we need to know how you’ve reached up till now with equities. Did you invest directly in equities or have taken the route of mutual funds to do so? Assuming you’ve invested directly, how have you dealt with the market fluctuations till now? Did it bother you or have you absorbed that with your market expertise? Market experts may not require much advice.
But since India’s retail participation in equities is still below 50%, most of us may not know the market dynamics and could thus err while choosing the stocks. Such individuals can thus choose to invest in stocks through mutual funds. Fund managers having in-depth market knowledge can steer your equity investment portfolio through the bull and bear of the market. In case you want life insurance besides investment benefits, choose from the best unit-linked insurance plans (ULIPs). Here, you get a list of funds to choose from – equity, debt and hybrid funds.
How to Choose the Right Funds?
Equity funds invest the maximum in stocks, while debt funds put the maximum in debt instruments such as bonds, debentures, etc. Hybrid funds invest in both stocks and debt instruments.
Equity funds deliver good returns over the long term. So, assess their performance spanning a minimum of five years. Don’t choose based on the spectacular 1-year performance regardless of how it fared before. See the consistency of returns when choosing the funds.
Debt funds do well for the short term mostly.
Hybrid fund performance depends on the allocation mix of equity and debt instruments. Assess equity-heavy hybrids much as you do in the case of pure equity funds. Debt-heavy funds would fare much like debt funds.