Building a Mutual Fund Portfolio to Retire in Your 50s
As you approach your 50s, financial and investment planning must become focused activities, to accommodate your current requirements and also prepare you for retired life.
Nov 2022
3 mins read
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4 aspects of planning a mutual fund portfolio in your 50s
1. Your goals
It’s important that you meticulously align all your investments such that they become a part of your overall goal to build a sizeable retirement corpus. The investments must complement your existing asset mix.
2. Your risk appetite
Aligning your investments to your financial goals is important, but so is aligning your portfolio to your risk profile. Your inclination to take risk must be controlled as you approach retirement. It’s important to make strategic realignments to ensure that your portfolio corresponds to a balanced risk appetite. At periodic intervals, say, every 3-5 years, you should consider re-evaluating your financial goals and your investment planning to ensure that your risk appetite remains in line with your financial goals. Monitoring your investments should happen even more frequently – ideally every 6 months – to ascertain if you need to make a tactical realignment.
3. Your investment allocation
Any goal-based financial planning should be based on a prudent mix of assets aligned both with your financial goals and risk appetite. Diversifying your investments can help you lower your risk substantially as well as optimise returns.
4. Monitoring and analysis
As stated earlier, monitoring your investment is important to ensure that you stay on track to achieve your financial goals as per the timeline. Seeing your money grow regularly also motivates you to stay committed and disciplined to your financial planning regime. These two aspects are the cornerstones of a successful investment planning initiative.
As you approach retirement, you may also need to make strategic shifts in your investments to make them available as required post-retirement. Investments that mature as you approach retirement can be parked in other avenues, preferably liquid, which will continue to earn marginal returns and contribute to your household expenses post-retirement.
You must continuously evaluate your portfolio performance, to identify avenues that provide better returns or opportunities over the medium- to long-term, so you can make a calculated and well-calibrated realignment in the portfolio.
Guide to investment planning for your mutual fund portfolio in your 50s:
Tip #1: Mind your savings
As you age, there should be a slow shift in your expenses with more focus towards your impending financial goals. Lifestyle expenses like fancy cars, the latest gadgets, flashy brands etc. may need to be curtailed, and saving towards your retirement goals should be the sole focus.
Remember, there is a difference between savings and investment – mere savings will not suffice, you need to consider investing in avenues that align with your risk profile as you approach retirement.
Tip #2: Think before taking risks
Risk-taking needs to be cautious and well-calibrated when you approach retirement. You need to gradually make the shift from an equity-heavy portfolio to a reasonably balanced portfolio and finally, as you retire, your portfolio should be conservative with lower equity exposure. Every investment that you make should be carefully evaluated, especially on the risk front, and included only if it aligns with your risk appetite.
Tip #3: Keep your investments liquid.
As you age, you may need to be mindful of increased and sometimes sudden health-related expenses. It is prudent to hold a sizeable amount as emergency funds in the bank account and highly liquid investments so you can access them quickly. It’s also prudent to plan for your medical emergencies using an insurance plan. Both types of insurance (life and health) are important as you approach retirement.
Tip #4: Finish off your big-ticket goals
You may have been committed to big-ticket goals such as buying a house or pursuing foreign education for your children, for which you may have availed loans. Handling an EMI post-retirement can be burdensome, so you must ensure that all these big-ticket goals are managed in time such that the loans are paid off way before your retirement.
Tip #5: Review your portfolio regularly.
Periodical monitoring of your investments is the key to building a mutual fund portfolio that optimises returns whilst keeping your risks under check. Seeing your money grow can also reiterate your faith in goal-based financial planning. Such monitoring should assist you in making tactical and strategic realignments. However, rebalancing your portfolio too often can be counterintuitive as it could attract costs and taxes – so try to strike the right balance.
These tips will help you achieve an optimal mutual fund portfolio, aligned to your risk-return profile, as you approach retirement. Consult your financial advisor and set yourself up for a fulfilling retired life.
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PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
Toll Free Number: 1800 266 7446
Email: care@pgimindia.co.in
This is an Investor Education and Awareness Initiative by PGIM India Mutual Fund.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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