October 4, 2023


Business does the job

Before you retire, understand how to create an ideal portfolio.

3 min read
How to design the ideal retirement portfolio - MarketWatch

Retirement is something that every working professional needs to be prepared for. Once you take up retirement, you are no longer required to work. But one thing you lose by retiring is the monthly income. Therefore, if you want to enjoy a comfortable retirement, it is a smart choice to formulate a financial plan which will help you acquire wealth over time. Formulating the right retirement portfolio is about meticulous planning. Financial planning ensures that you can retain a part of your standard of living even after retiring from your work.

It is important to remember that while planning, retirement planning is a multistep process. That means that retirement planning evolves over time. To enjoy comfortable and fun retirement, you need to build the financial cushion that will fund your life after retirement. If you want to have a fun retirement you need to start paying attention to the most important and probably boring part and that’s planning for the future.

What should you remember while planning for the future?

  • Make sure to start planning for retirement as soon as you can to take advantage of the power of compounding.
  • While planning for retirement please check things like estimating expenses, calculating required after-tax returns, determining time horizons, assessing risk tolerance and doing estate planning.
  • Retirement plans evolve through the years. Therefore, please make sure to rebalance your portfolio and simultaneously update the estate plans as required.
  • If you are a young investor you can opt to take more risks with your investment choices and if you are approaching retirement should be more conservative.

How to create an investment portfolio:

Please follow the steps below to create a strong portfolio that will help you to enjoy a comfortable retirement:

  • Transfer systematically:

Just a few years before retirement, financial advisors generally recommend transferring a part of riskier assets into debt-oriented funds. This is done because the equity portfolio is volatile in the short term and cannot be relied upon to earn near-term income. These kinds of transfers can happen through a systematic transfer plan (STP). This reduces the risk of timing the market. After retiring, you can opt to invest the money in schemes that will invest in debt securities while continuing to invest the rest of the portfolio in equities and other assets.

  • Please allocate funds smartly among assets:

Once you have retired, you can opt to invest in equity securities. Equities in your retirement portfolio provide you with higher expected returns. Income generated through equities has the potential to beat inflation and generate wealth for your retirement income.

However, it is important to note that very high equity exposure may also dent one’s portfolio. That may be the case especially if there is a bear market in the initial years. This reduces the principle which in turn directly affects the compounding, something that a retiree usually depends on for sustainability.

  • Emphasise the safety of your funds:

The safety of your funds is of utmost importance. It is better to leave behind some savings rather than face a situation where you may experience a shortage of funds.  While planning, please contact a professional financial advisor who can help you to customise your portfolio based on things like your age, portfolio value and market conditions at various points in time.

  • Make sure to invest in growth plans:

When you earn revenue from an investment scheme, instead of withdrawing, please reinvest it for the sake of your retirement portfolio. This helps investors to reap the benefits of compounding over time. One of the places you can invest in to enjoy compounding is growth plans.

While you may think that you can plan for retirement later, it will be a better choice to start investing either in a mutual funds scheme or any other smart investment plan as soon as you enter the job market. If you are still having doubts, you can get in touch with a financial expert as soon as possible.

Disclaimer: Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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