By Mayank Gupta
If you have just turned 40, it is a good idea to re-analyse your financial goals and focus on wealth-creation efforts. In the 30s, your responsibilities were lower, you had more years of earning left and could take on more risks. With rising expenses in your 40s and fewer years to retirement, you cannot take a conservative stance. Aim for 10-15% returns to combat any emergency needs.
First assess your retirement needs
To make your money work harder for you, begin with setting out financial goals. Almost 90% Indians in their 50s regret not starting earlier to save for retirement. The thumb rule is that your retirement corpus should be 30 times your current expenses. Take long-term regulations and tax consequences into consideration, particularly if you are employed. Your investment portfolio can be rebalanced as needed and your risk tolerance assessed with the help of a financial advisor.
Diversify your investments
If your financial goals include building a retirement corpus, paying for your children’s school fees, and taking trips overseas, add stocks to your portfolio. Keep minimum of 50% of your investments in stocks. Go for a combination of growth, defensive and income stocks. Growth stocks are a higher-risk-higher-reward option, while defensive ones remain stable during market downturns and income stocks offer high dividend payments.
Re-evaluate insurance cover
In your 40s, insurance can no longer be at the bottom of the priority pyramid. Whole life insurance offers several top-up options, including receiving part of the funds in case of a terminal illness. The awareness and uptake of other insurance products, including term insurance, child education plans, family health plans, and group insurance, is low. Investing in unit-linked insurance policy via systematic investment plans means you can start your wealth creation journey without a huge capital outlay.
Emergency funds
Big expenses pop up without notice. At the age of 40 or before, it is imperative to ensure that one sets aside funds in the form of liquid funds. These debt funds invest in bonds with maturities up to 91 days and come at a low risk and allow a chance of higher returns as compared to savings bank accounts.
It is good to review your entire portfolio at the end of the year. Identify the areas that need adjustment according to your changing financial position and needs. Consider the tax implications of your portfolio, maturity of fixed income earnings, lock-in periods of investments, and global diversification. You have a couple of decades to grow your money. Take advantage of that.
The writer is co-founder & COO, Zopper.
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