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

Mutual Fund Exit Load Changes

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 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Read more

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...
Read more

Birla Sun Life Mutual Fund Launches Birla Sun Life NIFTY ETF

Birla Sun Life has launched a new fund namely, Birla Sun Life Nifty ETF, an open ended exchange traded fund. The new fund will be open for subscription from 4th July to 18th July 2011, at an offer price of Rs 10 per unit. The investment objective of the scheme is to generate returns that closely correspond to the total returns of securities as represented by S&P CNX Nifty, subject to tracking errors. No exit load will be charged under the scheme. The performance of the scheme will be benchmarked against S&P CNX Nifty and will be managed by Satyabrata Mohanty.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Birla Sunlife Mutual Funds: http://prajnacapital.blogspot.com/2011/...
Read more

Mutual Fund Reivew: Birla Sun Life Asset Allocation Conservative

Birla Sun Life Asset Allocation Conservative has numbers on its side to prove its credibility… Don't be surprised to find this Fund of Funds ( FoF ) in our recommendations. It has earned its place. And despite the difference in the structure of the product, there is no arguing with the numbers.   Of the total 6 years of its existence, the fund has been among the top 10 funds in its category in four of them. Last year it put up an average show and the only year it underperformed its peers was in 2008.   One aspect to look at when investing in an FoF is the expense ratio. The expense ratio of an FoF is capped at a lower limit of 0.75 per cent (2.50% for an actively managed fund). However, the FoF not only has its own expense (though lower) but even the expense ratio of the fund it is investing into. Fortunately, the fund manager takes that into account. "Expense is one of the important criteria used for fund selection and is the main reason for our investment in BSL Ind...
Read more

Short-Term Investment Options in Mutual Funds

Mutual funds offer liquid funds and ultra short term funds in the debt category, which are suitable for short investment periods. Ultra short-term funds were earlier known as liquid plus funds. Liquid funds invest in money market instruments with a maturity of 91 days or less. However, there are no such restrictions for ultra short-term funds. Who should invest in these? These are open-ended schemes. Investors with a short investment horizon or with surplus cash and low risk appetite should look at these. These could include corporate as well as retail investors. Those interested in staying invested for less than 15 days can opt for liquid funds. Retail investors who want to remain invested for two-four months, can look at ultra short-term funds. The short duration for both liquid and ultra short-term funds shields them from any interest rate volatility.   What kind of returns do they offer? In terms of an investment period less than 15 days, these funds are comparable to a ba...
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