India is a young nation enjoying the gift of demographic dividend with its youth entering the workforce in large numbers. Young investors should have a high risk-taking appetite, but the asset allocation mix of our country is not in sync with the risk profile as bulk of household savings is put in banks’ fixed deposits. Such a conservative approach is not prudent, especially for a long-term investment goal such as retirement planning.
Lifecycle-based investment – the ideal approach
The ideal approach for retirement planning is lifecycle-based investments viz., splitting retirement planning in three phase - accumulation, consolidation and distribution. As per lifecycle investing, asset allocation should be aggressive in the accumulation phase, moderate in the consolidate phase and conservative in the distribution phase. As the investor reaches retirement age, risk profile and asset allocation should change from aggressive (accumulation) to conservative (distribution).
Mutual funds offer the best platform for retirement planning. You can allocate your corpus across various asset classes and opt for systematic features to make the process simple and seamless so that investors can enjoy their sunset years without a cloud of worries.
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