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Another takeaway is that retail investors have limited their preference to better quality stocks. The NSE team has studied “concentration” in the market.

Being a conservative investor is a viable strategy, however, there are proper and improper ways to be conservative. The term “conservative investing” refers to an investment approach that places a high value on capital preservation over all other considerations.

Consistent returns are the goal of a conservative investment strategy, which focuses on low-risk assets. Instead of chasing the latest hot stock or a buzz-worthy startup just gone public, investors that follow a conservative investment plan hold on to their money.

Holding a variety of asset types, such as bonds, large-cap equities, mutual funds, and exchange-traded funds (ETFs), helps reduce the volatility of their portfolio. “Direct equity may be a good option for people who keep a close watch on the markets. For the others, equity mutual funds are the best option when it comes to conservative investors. Also Although PPF and NPS are considered to be rather safe instruments, one must diversify retirement portfolio with relevant inflation-beating investing instruments like MF.,” said Priti Rathi Gupta, Founder, LXME.

Here are five things a conservative investor should keep in mind:

Investing in “safe” but low-return investments poses problems

Fixed income is a crucial factor in investors going for less volatile products than equity. However, portfolio growth is affected by this. “A conservative investor has moderate to high-risk capacity but ends up not participating in the equity market because of low-risk appetite. Risk capacity is based on income levels, lifestyle, goals, liquidity requirements, time to retirement whereas risk appetite is psychologicaly based on background, past experience, and ignorance about equity markets. A conservative investor tends to keep most of their surplus in savings bank accounts and fixed deposits. This ends up eroding purchasing power due to returns lower than the inflation rate,” said Anup Bansal, Chief Investment Officer, Scripbox.

Retirees who want to keep their portfolios as conservative as possible must also keep their withdrawal rates as low as possible. This will help in the fund last longer.

Having an extremely cautious investment portfolio has its own set of dangers. Healthcare costs later in life may raise spending if inflation or portfolio growth isn’t strong enough to meet the budgeted growth rate. One other way to tackle this is to plan your retirement budget.

“You must calculate the years of retirement left for your job by computing your current age and your approximate age of retirement defines the same. Find out your income source after you retire for instance you can receive a pension, can give your home or shop on rent, etc. There are much more avenues to look out for retirement planning with a detailed roadmap to each option. And first and foremost thing is to keep our eyes open for the best possible scenario to invest and make the very best out of the market situation,” said Amit Gupta, MD, SAG Infotech.

Inflation is the second factor to consider

Even if you’ve set up a strict budget for your golden years, remember that you don’t have complete control over your spending habits after you hit retirement. Anyone who has shopped for groceries or topped up their tank of petrol recently understands the danger of rising prices. Then there are the ever-increasing expenditures of healthcare.

Even retirees who strive to keep their spending at relatively low levels are concerned about inflation. That said, if your consumption stays the same, more significant inflation could push your overall expenditure — and hence your withdrawal rate — higher than you expected.

Patterns of spending

It’s essential to think about how your spending habits have evolved throughout your retirement. According to recent studies, spending decreases throughout retirement and then rises later, primarily because of the high expense of uninsured medical care. “It is also seen that a conservative investor has many endowment insurance policies which give low returns and the overall risk cover is not adequate. Have adequate life and health risk cover. Life cover should preferably be taken through term policies,” said Bansal.

Broaden your view

You should consider all of your sources of income, including investment returns, property rent, child allowance, a retirement pension, and annuities. For example, you may earn some money by providing tuition services to those in need. Non-portfolio sources of retirement cash flows could be used to provide a foundation for retirement cash flows that would meet only the most basic of living expenditures. As a result, the portfolio and portfolio withdrawals are freed up, leading to a greater sense of well-being.