Page 28 - Seniors Today -Volume no1
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Money Matters

                                        Financial Planning for your Second Innings

                                        Deepak Gagrani highlights the pitfalls seniors must avoid
                                        to enjoy one of the most glorious phase of their life

        In an era of falling interest rates and increas-     as a way to determine investment allocation to-
        ing life span, financial planning has assumed        wards equities or other growth asset class. Such a
        significant importance for senior citizens to        generalisation has been one of the biggest invest-
        effectively manage their retirement corpus.          ing fallacies being practised and has negatively
        Gone are the days when a passive investment          impacted the portfolios of many seniors.
        strategy could help generate commensurate
        returns to take care of sustainable income           “Successful investing is about managing risk, not
        levels. A well=defined investment strategy,          avoiding it” as said by Benjamin Graham is rele-
        aligning the investor’s goals and objectives         vant at all stages of life
        with their risk profile, is as important in the
        wealth management stage of an individual,            A more rational approach of asset allocation is to
        as was in their wealth creation stage. One has       segregate funds basis their end-objectives.
        to remember that ‘An individual retires; their       •  Investments that generates regular income to
        money has to continue to work for them’                 take care of routine expenses
        As one steps in retirement, flush with a size-       •  Emergency Fund
        able cash corpus, they are at risk for making        •  Money which is not needed for at least 5 years,
        some common financial mistakes. Certain                 should be invested in growth asset class such
        seemingly small investment mistakes can                 as equities, real estate etc depending on pre-
        hinder the financial planning process consid-           vailing asset class cycle.
        erably. A few pitfalls which one must avoid to
        enjoy a glorious phase of their life.                With the increasing life span, the retirement stage
                                                             can also be a fairly large period. The last category
        Extremely Defensive Portfolio                        of investments will not only help retired citizens
        As an investor embarks the retirement phase,         to comfortably enjoy their retirement phase, but
        there is a tendency to adopt a very defensive        also leave a financial legacy that outlives them, for
        strategy and invest the corpus in regular            their heirs.
        but low yielding income generating prod-
        ucts, thereby leading to miss-out of the large       Excessive Indulgence
        growth potential of the corpus. Most of us           Exactly opposite of the above, when an investor
        have come across the rule of ‘100 minus age’         gets a large lumpsum corpus on retirement in

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