Your Money: Investment strategies for different life stages
October 9, 2020 12:45 AM
Financial planning for retirement has to start right at the young earner stage, since longer the tenure of investment, the larger will be the corpus after retirement
there are roughly 5,250 listed small-cap companies (Market cap of <INR 8,000Cr) in India today.
By Surbhi Jain
Earning money is important but it is also necessary to follow a financial plan and invest money accordingly. Saving money is not a solution as it does not offer growth in return; keeping it in a savings bank account only gives interest which is not in line with inflation. So the money should be invested in such a manner that it may earn return along with growth.
The investment strategy differs from person to person and life stages. Here are some avenues of investment for people of different age groups.
Young earner The investment options for young individuals who have just started earning and have no responsibilities will be different. While they may not have any responsibilities, they will have goals to achieve. As they are young and have time in their favour, they can go for equity investment through equity mutual funds which offers growth as well as capital protection.
With increase in income, taxability will also arise. So, to reduce tax burden they can invest in equity-linked savings schemes of mutual funds or Public Provident Fund. Young people should also have an insurance cover as a protection against any uncertainties.
Middle-aged with family As a young person reaches another life stage, his goals and requirements will also change. So his investment structure also needs to be reviewed and re-planned accordingly.
At middle age, a person needs to shift from pure equity investments to debt portfolio or a fixed income earning instrument. As he has to incur recurring expenses, he has to maintain liquidity also. Goals such as child’s education and marriage should be considered. For such goals, investments in gold should be considered as the yellow metal is a hedge against inflation and the value grows with time.
Retirement stage At this stage a person retires from his work and now wants his hard-earned money to work for him. For this, a person has to start financial planning for his retirement right from the beginning as a young earner since longer the tenure, the larger will be the corpus on retirement.
Investing the accumulated corpus after retirement in various government schemes such as Senior Citizen Saving Scheme, Pradhan Mantri Vaya Vandana Yojna, Post Office Schemes can be considered. Money can be invested in these schemes which have lower risk as compared to investment in equity. Investment in debt can also be done after evaluating the individual’s risk appetite.
So big money can be made through high savings, wise investing and lots of patience.