These 4 smart money tips will ensure you get rich without taking risk

Retirement is one financial goal that is largely overlooked. With increasing life expectancy, retirement years could turn stressful if one does not plan in advance. Hence, put aside 10% of your take home salary in a retirement basket, as soon as you start working. Invest in instruments where the compounding takes place more frequently and readjust your risk profile gradually to increase returns. Asset allocation will largely depend on the level of risk you are comfortable with and your age. It also depends on how many dependants you have.

Arriving at your retirement needs

Consider your monthly expenses at current costs. Assuming an inflation rate of about 6 per cent, inflate the expenses for the number of years left for you to retire. This will help you arrive at the amount of monthly expenses you would need to survive through your retirement years. Then, estimate how much you need to start saving till your retirement age to accumulate a corpus that could provide you with the inflated monthly amount.

Change asset allocation according to your age

If you are starting out young, your funds’ portfolio should be heavy on equity funds - around 80 per cent. Aggressive investors (equities oriented) can invest 30 per cent of their funds portfolio in mid-cap and small-cap funds.

In your ‘30s, lighten up your equity funds holding marginally - the aggressive investor from 80% to 70% and the conservative investor (debt/fixed income oriented) from 60% to 40%. In your ‘40s, the best bet for the aggressive investor is a perfectly balanced exposure to both debt and equity. The conservative investor may choose a 10-20% higher debt allocation. In the ‘50s, move your money from volatile equity to safer debt, to ensure the safety of your capital.

Multiple debt instruments for regular income

For regular income use a combination of pure debt-based products. Bank fixed deposits, Senior Citizens Savings Scheme, post office Monthly Income Scheme (MIS) and immediate annuities schemes should form the bulk of your portfolio. While they do give constant income, their returns will not beat inflation. Besides, partially liquidating them during their tenure attracts a penalty. Hence, renew existing fixed-income investments only after considering the tenures.

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Shift to debt gradually

Post-retirement invest in balanced funds with a maximum exposure of 65 per cent in equities. Invest only in high-rated corporate bonds. Create a contingency fund for emergency expenses.

Source: DNA Money