Invest in Mutual Funds in your 50s

Turning 50 is a momentous milestone in an individual’s life. It doesn’t only represent that you will be near the top of your career, but it also means you will have lots of responsibilities with a family to look after.

Invest in Mutual Funds in your 50s

The utmost important thing is that you don’t have more than 10 years of service left and retirement is very near. Therefore, you need to plan for retirement.

Initially, determine how much money you would need to post your retirement.

Focus on your savings

In the 50s of your life, your aim should be maximizing savings so do not focus too much on maximizing your returns. If you are in your late 50s then pay special attention to the fact that you can’t afford to take too much risk.

Revisit your portfolio

If you previously had a portfolio, then it is time for you to revise it. You should avoid taking needless risks at this age of your life, but at the same time you can’t be completely conventional. Look through your portfolio and try and lessen the allocation of risky assets and substitute them with safe options.

Don’t depend on PF alone

Provident funds can be one of the safest investment options and it is fortified to have a PF account, but depending totally on your PF for retirement needs is not something you should go all-out for. Validate that your portfolio has a combination of equity as well to keep returns on an upward graph.

Don’t get tangled in new loans

By the time you reach 50, you’d be dedicated to playing EMIs on prior commitments, and in many cases, you’d be nearing the end of certain EMIs. But taking a loan would add a redundant burden to your finances. This will not only take away the lump for your investments but also put a dent in your savings.

Investment planning in your 50s is not a difficult combat if you stay disciplined and do not take decisions out of fright. Keep your plan simple and prioritize your needs. Though you can always pursue help from a finance professional who can assist you to take the right decision.

Mutual funds for beginners

A mutual fund is a pool with a certain investment objective. This investment objective is laid out in the factsheet and other details related to the mutual fund.

Mutual funds for beginners

Mutual funds are operated by professional money managers known as fund managers, who allocate the fund’s assets and attempt to produce returns for the investors.

The investors make money through regular dividends/interest and capital appreciation. They can either choose to reinvest the capital gains via the growth option or can earn a steady income by way of the dividend option.

Why one should invest in Mutual Funds

Low investment

You can build a mutual fund portfolio by investing a minimum of Rs 500 a month through SIP in a mutual fund of your choice. You also have the option to invest in either a lump sum or a systematic investment plan (SIP).

Tax Saving

Mutual funds provide the best tax-saving option. You get a tax deduction under section 80C up to a maximum of Rs 150,000 per financial year.

Professional fund management

Mutual fund investment is managed by the fund manager who is backed by a team of researchers. The fund manager formulates the investment strategies for your asset allocation.

Higher return potential

For an investor with moderate to high-risk appetite investing in equities through mutual funds would help him/her to earn high returns. The investor with a low-risk appetite could invest in debt mutual funds.

Important things you should consider as a beginner

a. Fix an investment goal

b. Choose the right fund type

c. Shortlist and choose one mutual fund

d. Diversify your portfolio

e. Go for SIPs instead of lump-sum investments

f. Keep KYC documents updated

Do not invest without knowing the risk!

Risk means the degree of uncertainty or potential financial loss inherent in an investment decision. In simple terms, the risk of losing your capital is the only risk anyone should be concerned about.

Do not invest without knowing the risk!

The academic world often claims the volatility of asset price as a measure of Risk. Volatility measures price movement across the average price. If the average price is 100 and the price movement is between 100-120, the volatility is low. Whereas if the price movement is 50-300, the volatility is high.

The volatility of asset price can be taken as a measure of risk as far as negative movement is concerned. Where is the risk if you buy at 50 and the price movement is only upwards, volatility may still be high.

Imagine, your investment in a fixed deposit. The volatility is low and so is the return, it is indicated a low-risk instrument.

Now, imagine your investment in high-quality stocks (Nestle, Asian Paints, etc.). The share price grows over time. The measure of volatility is unusually high even if you earn 20% per annum in a high-quality business.

As rational investors, we should see risk only from the risk of losing the capital point of view. As far as you are invested in sound assets, your probability of losing capital is low. Now combine sound assets that are well diversified, the probability of losing capital goes further down.