Skip to main content

Portfolio Risk Should Decrease With Investor Age

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Start with higher equity allocation, raise debt portion as you grow older

 


Various financial needs arise at various stages of every individual's life. When someone takes up a job for the first time, the objective is to be financially independent. Then as the individual progresses in life, various needs keep coming up, which may include buying a car, a home, getting married, starting and then raising a family, educating children, marrying them off and then building a corpus for a peaceful and financially independent life during the sun set years.


Then there are short, medium and long-term goals which need to be met through intelligent and disciplined financial approach. Within the mutual fund fold, there are solutions and products which can help you meet these goals of varied durations. And the solutions could be through the pure equity scheme route, a pure debt scheme route, or a combination of both. The solutions usually use gold funds or pure gold for meeting part of an individual's goals, as does other debt instruments and insurance products (see the case study by Sumeet Vaid on this page).


The basic premise on which life stage planning is based on is human life value, which as per financial theories, diminishes with age. Also life stage planning integrates the idea that as one grows older, the product focus as well as the assets one should invest in also changes.


At say 20, one's needs are different, so the goals should be different. Then again at 30, needs and goals are different and similarly when one is 45, 55 and 65 years and so on," explained a top fund industry official. At various stages of life, tastes differ, perceptions differ and financial goals also keep changing.


So financial planning should also change as per changes in all these factors.


Here the basic factor to take care of is as one grows older is that the risks associated with one's portfolio should come down, along with the volatility, financial planners say. To do that the proportion of debt in one's portfolio should go up with age and the proportion of equity would come down. The basic thumb rule to achieve this portfolio mix is that the percentage of equity in your portfolio should be one hundred less your age, and the balance should be in debt. If you can maintain this balance, naturally the debt portion would increase and the equity portion would come down as you grow older, and thus the associated risks and volatility.


The approach here should be nearer the goal, the percentage of highly volatile assets in the overall asset allocation should be lower. When the goals are much further, you can take more volatility in the portfolio. For example, for an investor if the goal is 20 years from now you can take more volatile assets in the portfolio than when the goal for the investor is just about five years away. So the portfolio volatility could be higher at the start of the planning process and diminish over time.


Another factor that is integrated within the human life value concept is that as one grows older, the life insurance one has would require should diminish while the allocation to debt for the same investor would go up.


In India, mutual fund houses offer various life stage products, while financial planners and advisors are also capable of mixing and matching various mutual funds and other products to give investors a portfolio that takes care of their goals during their lifetime. Other than the equity and debt funds from various fund houses that could be mixed within the same portfolio, there are specific plans from some select fund houses which can take care of an investor's needs to build a pension corpus, a plan to take care of children, investments in gold and also some touch with insurance.

PLANNING FOR FINANCIAL GOALS


ä The basic thumb rule is that the percentage of equity in your portfolio should be one hundred less your age, and the balance should be in debt


ä Besides equity and debt, a portfolio should also have gold and gold ETFs ä As one grows older, life insurance should diminish while the allocation to debt should go up


ä Other factors influencing the risk appetite of an investor should also be kept in mind while charting a financial plan for an investor

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...
Read more

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...
Read more

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...
Read more

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...
Read more

8% Government of India Bonds quick guide

For those seeking comfort in safety of returns, the Government of India issued 8% savings bond once again comes to the fore. First launched in 2003, these bonds are issued by the government with a maturity of 6 years. The bonds are available at all times with specified distributors through whom you can apply to invest in them. Here is a quick guide to what the bond offers and its features to ascertain to check for suitability. What are Government of India bonds Government of India bonds are like any other government bonds with specified rate of interest. The rate is fixed at 8% per annum paid half yearly, or you can opt for cumulative payment of interest at the end of the tenure. You can buy these bonds from State Bank of India and its associates, other nationalized banks and some private sector banks such as HDFC Bank Ltd and ICICI Bank Ltd, among others. The bonds can be bought from the offices of Stock Holding Corporation of India as well. They are available in physical form onl...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now