Retirement planning at 40: Various products one can invest in

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Deepali Chavan (41) started a new Systematic Investment Plan (SIP) in equity fund when her daughter Niyati was born. Chavan, a service sector professional, believes that retirement planning is even more so important given the pandemic situation and increasing inflation.

Her retirement portfolio consists of a mix of equity mutual funds, debt fund as well as traditional investment options like fixed deposits (FDs). “At this age, security is more important than higher returns…..hence I believe in mutual funds as it is mixed of both if one stays invested enough for the long-term duration,” says Chavan.

When it comes to long-term horizon goals, equity mutual funds, direct equities, fixed income/debt, and gold usually provide a good diversification in terms of asset class and have the tendency to even give double-digit returns over a period of time. Considering equity allocation forms a major part of the portfolio, the compounding effect will assist the investor to achieve the respective long-term goals especially retirement planning.

“There are multiple instruments like FDs, National Pension Scheme (NPS), Public Provident Fund (PPF), Equity, Mutual funds, etc., however, to create a decent corpus a mix of Equity and Debt is recommended and mutual funds – Hybrid will be better suited for the same. Hybrid schemes have adequate exposure to Equity as well as debt-related instruments,” says Omkeshwar Singh, Head- RankMF, Samco Group.

Also read: Planning retirement at 40? Don’t ignore these factors

As the age increases, the risk profile of an individual generally tends to become relatively more conservative. Hence, products that are moderate on the risk-reward spectrum would be the right fit believes market experts.

“Balanced Advantage Funds as a category can work very well for investors at age 50. Also, one would need to keep in mind that investment products that lock in the capital for the long-term like Alterative Investment Funds, etc. should only be considered post detailed calculations around liquidity requirements,” says Ankur Maheshwari, CEO, Equirus Wealth.

That said, it is important that while you are planning your retirement at 40, one should calculate the corpus they need on retirement to ensure they can maintain their lifestyle throughout their retirement and portfolio is earning inflation-beating returns at the least. One should not undermine the importance of term insurance because if there is a huge gap in what your corpus is and what it should be your retirement goals might take a hit.

“If you’re counting on your future income for any goals, that’s the gap to be filled with insurance,” says Shweta Jain, CFP-Founder of Investography and author of My Conversations with Money.