Smart ways to Invest for Secured
Retirement Corpus..!
In order to accumulate wealth for
retirement, an individual must focus on both saving and long-term investing.
In order to accumulate wealth for
retirement, an individual must focus on both saving & long-term investing.
First of all, one must define a
goal and then make a plan to achieve the goal.
An individual must set up and
maintain an emergency reserve fund & save smartly & invest wisely.
The retirement goal must be based
on three factors - the age at which one
expects to retire, the lifestyle one hopes to support and estimating the corpus
needs given the increased longevity.
Also, balancing personal risk
tolerance with the risk capacity associated with the longer investment horizon
of retirement is very essential. Moreover, diversification of asset classes is
key as it can help to maximise returns for a given level of volatility in the
markets. To make the best of your investment and yet stay risk-averse,
retirement planning must be a continuous process with an appropriate asset
allocation strategy comprising of equities, debt, gold and real estate.
An individual must monitor
progress of the portfolio and revisit the plan at least once a year to factor
in significant market moves or life changes. Modifying a plan according to
circumstances will help build retirement wealth. With some deft planning, it
would not be difficult to plan and rejig investments that earn steady income
and counter inflation.
Most Indians prefer life to invest
in instruments like insurance and fixed deposits to build a retirement corpus.
About 60% use savings accounts to
prepare for retirement, which constraints their ability to earn higher returns.
Analysts say one’s post-retirement
portfolio should be built on the basis of the current risk tolerance level.
Since only 10% of India’s working
population has any form of social security, early retirement planning is
important to maintain one’s current living standards.
One must look at the risk profile
and invest required amounts in products that help generate returns.
Most importantly, one should
invest in products that one understands. Re-balancing portfolios ensures that
investments do not over-emphasise on any particular asset category.
Selling investments from
over-weighted categories and using the money to invest fresh in under-weighted
categories will help reap profit and escape longevity risk.
Equity returns, either through
direct investment in stocks or / mutual
funds, are ideal over the long term, and are higher than what is earned in typical
retirement avenues like provident fund and fixed deposits.
When you near retirement, you can
gradually de-risk to debt instruments. Even post-retirement, you can consider
investing partially in equity or balanced mutual funds, after analysing your risk
tolerance.
Any retirement portfolio should
have 2 components.
One that earns the minimum income
to sustain a basic lifestyle through annuity and monthly income plans and, the
other, which gains from the upside through select equity exposure.
An individual can invest in bonds
or / fixed deposits, which will give a regular payout.
Or, one can build a regular income
from your second home in the form of rental income.
Although it is important not to
completely depend on rental income, you can plan for this, which will reduce
your retirement corpus needs.
Most importantly, never postpone
your retirement investment plan & put an effective retirement plan at the
early working stage.
Src: FE Bureau
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