Age-wise Investment and Financial Planning

Investment planning is not a one-time exercise. It is continuous and evolving. Investment strategy should be in sync with one's risk profile, which changes with age. Young investors typically have a higher risk appetite and should adopt an aggressive investment strategy. Middle-aged investors should have a balanced approach with a moderate investment strategy. Finally, retired investors (or those nearing retirement) should adopt a conservative strategy. It does make sense to create a strong base at a younger age to reap the benefit of compounding in the long term. This article offers insights on age-wise investment planning.

Investment Options for different age groups and the corresponding needs, risk profile and asset allocation pattern​


(For illustration purpose)

As illustrated in the table, investors in their 20s are young and not burdened with big responsibilities and dependents. This is the right time to start investing so that the power of compounding can work magic on your money. It is the right age to invest in equities to capitalise on the higher risk bearing capacity. In fact, you could invest a small portion in debt funds or traditional savings instruments.

At 30s, people have a career/profession and can continue with higher allocation to equities to meet goals such as buying a house, car, etc. At 40s, the number of dependents, and commensurate expenses, increase and the risk profile changes to moderate with a portfolio mix of debt, equity and cash.. At 50s, individuals are nearing the retirement stage and asset allocation is conservative; there is greater allocation to debt and cash, and lesser to equities. At 60s or the retirement stage, in the absence of regular income investment should be only in relatively less risky options such as liquid funds. ​

Mutual fund Investment Tips – Ideal ​for all age groups

Most young investors delay investment planning or park it in conventional avenues. Little do they realise that the delay causes loss in income. In addition, traditional savings investment options give safety of capital, but could be unable to beat inflation and generate the required corpus. Hence, one can consider investing in equity at an early stage of your career and switch to other safer asset classes as you grow older.

Case study

Amit and Arun started their career at the same time. Amit decided to start investing Rs 2,000 a month at age 25, knowing fully well that a small amount saved in the right manner can ensure big savings over the long run thanks to the power of compounding. Arun, on the other hand, procrastinated and delayed investing to age 30.

The result: Amit was able to garner more money at 60 years – Rs 2.93 crore. Arun, who started five years later, was able to generate Rs 1.39 crore as a corpus. To generate the same corpus as Amit, Arun would have to invest more money on a monthly basis, i.e. Rs 4,250.

* 15% annualised returns of S&P BSE SENSEX, i.e. average of daily annualised 15 years' rolling returns of S&P BSE SENSEX as on March 28, 2018 since June 30, 1979 (15 year rolling returns for the S&P BSE Sensex for the 15 year period remains 15%)

Hence, investing early gives investors a head start to meet their financial objectives without sacrificing much. It also instills discipline and adequate financial support to manage financial stress.

"Don't delay! Start investing in your future today!"

Mutual fund Investment Tips – Ideal ​for all age groups

Mutual funds have options for all age groups as they invest across asset classes. Benefits such as professional management, lighter on the wallet, convenience, liquidity and tax efficiency enhances the attractiveness of this investment avenue. Mutual fund options for different age groups are as detailed below.

Investors can choose from the different fund types based on their risk-taking ability, expectations of returns, income and investment horizon.

Mutual funds also offer Systematic Investment Plan (SIP). For instance, for a long-term goal such as retirement kitty, investors can start a monthly SIP of Rs 3,000 in an equity mutual fund at age 25 and continue for the next 35 years. Assuming 12% rate of return, one can generate a retirement kitty of Rs 1.93 crore at the age of 60. For short-term goals such as buying a car, investors can start a SIP of Rs 5,000 for 10 years and garner Rs 11.50 lakh. Investors can also increase their installments by a fixed amount at pre-determined intervals through incremental SIP to attain different goals across different life stages. SIP helps average the cost per unit, reduces the effort of tracking the market as one invests regularly, and helps to multiply wealth through the power of compounding.

Once invested, keep reviewing and modifying the investment portfolio as the financial markets and investors' risk-return profile are dynamic.

Summing up

Proper investment planning is the key to achieving financial goals. However, invest as per your risk-return profile and investment horizon. To reiterate, start early to comfortably achieve all your financial goals.

Disclaimer: The above information is prepared for the purpose of investor education only and is solely for creating awareness and educating investors / potential investors about Mutual Fund Schemes and for their general understanding, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Whilst SBI Mutual Fund takes reasonable steps to ensure the accuracy of all information as mentioned above, it does not guarantee the completeness, efficacy, accuracy or timeliness of such information Investors are advised not to act purely on the basis of information provided herein but also seek professional advice from experts and consult their financial advisers before taking any investment decisions

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.​

Get a Call Back

An Investor Education and Awareness Initiative.
Investors should deal only with registered Mutual Funds, details of which can be verified on the SEBI website ( ) under ‘Intermediaries/Market Infrastructure Institutions’. Please refer to website of mutual funds for process for completing one-time KYC (Know Your Customer) including process for change in address, phone number, bank details etc. Investors may lodge complaints on against registered intermediaries if they are unsatisfied with their responses. SCORES facilitates you to lodge your complaint online with SEBI and subsequently view its status.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Copyright © 2016
An investor education initiative, SBI MUTUAL FUND.
Get a Call Back