It is the beginning of 2010, the start of a new decade. Let us learn something from the past decade. Now is a good time to draw up an investment strategy based on your present age. We will discuss in this article a few tried and tested tips that will guide you with your asset allocation. The key to your investment strategy lies in factors like your goals, age as well as your risk appetite. Let us now go into details.
AGE GROUP – 25-30 years (minimal responsibilities)
Below 30 years of age, generally you would have minimal responsibility so; this is a good time to invest in equity. Although life insurance might not be on top of the list but health insurance is a must (even if you have corporate mediclaim). This is a time where you can take risks, thus major part of your savings (say 40% of your income) should be invested in equity. Study show that by the time one crosses 35 years they would have switched few jobs and have 2 or more salary accounts. Many bank accounts mean maintaining minimum balances – which is idle funds!
AGE GROUP – 30-45 years
After 30 years of age the responsibilities, dependents (spouse, children, and parents) increases. Other than a health cover, need for life insurance arises. In fact it is a must to have term insurance and goal oriented savings (towards children’s education, home loan prepayments, retirement planning etc.). Investment should be a combination of debt and equity. Home loans can be taken but the urge to splurge has to be curbed. Your total EMI should not be more than 30-40% of your monthly income. Indian investors calculate equity allocation by subtracting the age of the investor from 80. For example, if you are 38, then 42% of your total investments should be in equity.
AGE GROUP – 45-55 years
This is closer to the retirement age so the investment portfolio has to be accordingly balanced. Health and critical illness cover becomes a must have. Equity allocation should be somewhere between 25-35% of your total income. In this stage of life investment should be secured in debt or gold, so that the final corpus is not depleted due to market fluctuations. This is a time where one usually has to fund their child’s marriage and prepare a will.
AGE GROUP – 60+ years
Senior citizens should have low-risk liquid investments for emergencies. It is important to have a health policy by now as it becomes difficult to get one at this stage in life, and it is clearly crucial to have one now. Life insurance can be avoided because it is unlikely that your family would be dependent on you at this age. You can invest in instruments like 9% senior citizens’ savings scheme and post office time deposits that promise safety and regular income. Senior citizens don’t take risks and it is also good to continue this trend but a small percentage maybe invested in equities.
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