<p>If you’ve just turned 40, you’re a millennial and a digital native. One-click access to banking and Google Answers for financial advice has helped you achieve your short-term goals. While the youth have the advantage of time, you have the benefit of greater knowledge and maturity to guide your financial decisions. You’ve already climbed a few rungs of the corporate ladder. Your financial commitments are higher too, with the responsibility of young kids or aging parents and with retirement looming over, it’s now the right time to build financial security for the long haul.</p>.<p>It’s time to reanalyse your financial goals and focus on wealth-creation efforts.</p>.<p><strong>Assess retirement needs</strong></p>.<p>To make your money work harder for you, begin with setting your financial goals. Almost 90 per cent Indians in their 50s regret not starting earlier to save for retirement. When planning for your golden years, don’t forget to factor in waning health as you age, inflation, and some extra funds to fulfil your desires. The thumb rule is that your retirement corpus should be 30X your current expenses. Take long-term regulations and tax consequences into consideration, particularly if you are employed. Your investment portfolio can be rebalanced as needed and your risk tolerance assessed with the help of a financial advisor.</p>.<p><strong>Understand your risk appetite</strong> </p>.<p>In the 30s, your responsibilities were lower, and you had more years of earning left. This means you could take on more risks. With increasing expenses in your 40s and fewer years to retirement, your risk appetite is lower which is coupled with medical expenses and other miscellaneous matters. Yet, you cannot take a conservative stance, as your investment returns need to beat inflation. Aim for your investment portfolio to generate 10 per cent to 15 per cent returns minimum to combat any emergency needs.</p>.<p><strong>Diversify investments</strong></p>.<p>If your financial objectives include retirement, paying for your children’s school, and taking trips overseas, you should think about adding stocks to your portfolio. Keep a minimum of 50 per cent of your investments in stocks, because they can be one of the tools that will help you accomplish your goals in today’s marketplace given their worth and the rate of inflation. Being a liquid asset, stocks can come in handy during an emergency. You can choose a combination of growth, defensive and income stocks. Growth stocks tend to be more volatile and are a higher-risk-higher-reward option, while defensive ones remain stable even during market downturns and income stocks offer high dividend payments. </p>.<p>Mutual funds are a cost-effective way to diversify your investments. Choose the type of fund based on your financial goals, investment horizon and risk appetite. For instance, equity-linked saving schemes (ELSS) gave average returns of almost 18 per cent from 2020 to 2023. The thumb rule to follow here is to avoid putting more than 10 per cent of your net assets into risky investments. Mutual funds that invest in debt instruments or hybrid funds might be better if your risk appetite is low. Diversify your investment portfolio after checking the correlation between assets. For instance, stocks and gold have a strong negative correlation. When stocks decline, gold tends to rise. </p>.<p><strong>Re-evaluate your insurance coverage</strong></p>.<p>In your 40s, insurance can no longer be at the bottom of the priority pyramid. Whole life insurance, the most popular type of insurance plans in India, offer several top-up options, including receiving part of the funds in case of a terminal illness. The awareness and uptake of other insurance products, including term insurance, child education plans, family health plans, and group insurance, is low. For instance, only 45 per cent of millennials in India have heard of term insurance and less than 17 per cent have bought such plans. One can choose Unit Linked Insurance Plans (ULIPs), which invest part of your funds in equity, debt, or a combination of the two. Investing in ULIPS via Systematic Investment Plans (SIPs) means you can start your wealth creation journey without a huge capital outlay. </p>.<p>It’s a good idea to review your entire portfolio at the end of the year. Identify the areas that need adjustment according to your changing financial position and needs. Consider the tax implications of your portfolio, maturity of fixed income earnings, lock-in periods of investments, and global diversification. You have a couple of decades to grow your money. Take advantage of that.</p>.<p><em>(The author is Co-Founder & COO, Zopper)</em></p>
<p>If you’ve just turned 40, you’re a millennial and a digital native. One-click access to banking and Google Answers for financial advice has helped you achieve your short-term goals. While the youth have the advantage of time, you have the benefit of greater knowledge and maturity to guide your financial decisions. You’ve already climbed a few rungs of the corporate ladder. Your financial commitments are higher too, with the responsibility of young kids or aging parents and with retirement looming over, it’s now the right time to build financial security for the long haul.</p>.<p>It’s time to reanalyse your financial goals and focus on wealth-creation efforts.</p>.<p><strong>Assess retirement needs</strong></p>.<p>To make your money work harder for you, begin with setting your financial goals. Almost 90 per cent Indians in their 50s regret not starting earlier to save for retirement. When planning for your golden years, don’t forget to factor in waning health as you age, inflation, and some extra funds to fulfil your desires. The thumb rule is that your retirement corpus should be 30X your current expenses. Take long-term regulations and tax consequences into consideration, particularly if you are employed. Your investment portfolio can be rebalanced as needed and your risk tolerance assessed with the help of a financial advisor.</p>.<p><strong>Understand your risk appetite</strong> </p>.<p>In the 30s, your responsibilities were lower, and you had more years of earning left. This means you could take on more risks. With increasing expenses in your 40s and fewer years to retirement, your risk appetite is lower which is coupled with medical expenses and other miscellaneous matters. Yet, you cannot take a conservative stance, as your investment returns need to beat inflation. Aim for your investment portfolio to generate 10 per cent to 15 per cent returns minimum to combat any emergency needs.</p>.<p><strong>Diversify investments</strong></p>.<p>If your financial objectives include retirement, paying for your children’s school, and taking trips overseas, you should think about adding stocks to your portfolio. Keep a minimum of 50 per cent of your investments in stocks, because they can be one of the tools that will help you accomplish your goals in today’s marketplace given their worth and the rate of inflation. Being a liquid asset, stocks can come in handy during an emergency. You can choose a combination of growth, defensive and income stocks. Growth stocks tend to be more volatile and are a higher-risk-higher-reward option, while defensive ones remain stable even during market downturns and income stocks offer high dividend payments. </p>.<p>Mutual funds are a cost-effective way to diversify your investments. Choose the type of fund based on your financial goals, investment horizon and risk appetite. For instance, equity-linked saving schemes (ELSS) gave average returns of almost 18 per cent from 2020 to 2023. The thumb rule to follow here is to avoid putting more than 10 per cent of your net assets into risky investments. Mutual funds that invest in debt instruments or hybrid funds might be better if your risk appetite is low. Diversify your investment portfolio after checking the correlation between assets. For instance, stocks and gold have a strong negative correlation. When stocks decline, gold tends to rise. </p>.<p><strong>Re-evaluate your insurance coverage</strong></p>.<p>In your 40s, insurance can no longer be at the bottom of the priority pyramid. Whole life insurance, the most popular type of insurance plans in India, offer several top-up options, including receiving part of the funds in case of a terminal illness. The awareness and uptake of other insurance products, including term insurance, child education plans, family health plans, and group insurance, is low. For instance, only 45 per cent of millennials in India have heard of term insurance and less than 17 per cent have bought such plans. One can choose Unit Linked Insurance Plans (ULIPs), which invest part of your funds in equity, debt, or a combination of the two. Investing in ULIPS via Systematic Investment Plans (SIPs) means you can start your wealth creation journey without a huge capital outlay. </p>.<p>It’s a good idea to review your entire portfolio at the end of the year. Identify the areas that need adjustment according to your changing financial position and needs. Consider the tax implications of your portfolio, maturity of fixed income earnings, lock-in periods of investments, and global diversification. You have a couple of decades to grow your money. Take advantage of that.</p>.<p><em>(The author is Co-Founder & COO, Zopper)</em></p>