ARE YOU TOO OLD TO INVEST IN EQUITY MUTUAL FUNDS?

Are you one of those who has missed the early bus to wealth creation via equity funds? You might want to generate wealth but might be hesitant to do due to the risks associated with equity investments. Here’s something to brighten your mood – It is never too late to invest in mutual funds, even equity funds. This article will serve as an investment guide on how and where to invest money if you are a late starter. This article considers two scenarios – 1) when you are close to retirement 2) when you have already retired. Read on to understand how you can align your financial planning in such cases. 

Close to retirement

With a rise in the growth of the private-sector professions, the uncertainty towards retirement without the aid of a government pension has also amplified. If you are looking to create a healthy retirement corpus with the investment horizon of merely five years, consider doing the following things:

1. Check the communal value of your different types of investments such as small savings, fixed deposits, Employees’ Provident Fund (EPF), or any property that you purchased with an intention of investment.
2. Assess how much of this is available in the form of liquid cash during your retirement.
3. Estimate the time required for your underlying expenses to turn into liquid cash

If the above achieved amount is sufficient to bear your utility, expenses, predicted exigency and lifestyle, for a prolonged period, say ten years or more, then you might deliberate assigning higher amounts of your investments to equity funds.

However, if your corpus is not enough to cater to your post-retirement expenses, consider slacking on some costs first.

Post-retirement 

With no active stream of income, your capability to jeopardise your savings and invest in risky investments observe a abrupt drop. While your verdict on allocation to equity investments are dependent on several factors such as lifestyle, accommodation, family size, etc, you might consider allocating a minimum of 15% of your corpus to equity funds. This will help you earn inflation-beating returns. 

As a basic thumb rule of investing in mutual funds, the proportion of equity investments must be your age subtracted from 100. However, this rule does not always work and is highly dependent on an investor’s financial goals, investment horizon, and risk appetite. Choose the funds that best aligns with your investment portfolio. 

Several individuals might warn you against investing in equities and equity-related securities. They would ask you to discard these investment options as they are risky. However, one must not forget that the riskier an investment, higher is the probability of them offering significant returns. Always consider the risk-return ratio that you can afford to take. Remember, it is never too late to plan for a secured future. Realise the importance of investing and choose invest in SIP or invest in lumpsum basis your portfolio and availability of funds. Happy investing!