Keep your retirement portfolio separate from others

I am 32 years old and want to save for retirement by investing in equity funds. What are the best possible options? —Abhijit With more than 20 years to go for your retirement, you are well positioned to build a significant corpus by investing systematically in an aggressive portfolio during your working years. There are a few things you need to remember about your investments. The first thing to note is the need to do a proper estimation of the amount you need to save and invest every month. This calculation should take into account factors such as monthly living expenses, inflation (both now and after retirement), and projected returns for pre- and post-retirement investments. For example, if your living expense is Rs.30,000 a month (after housing- and work-related expenses), assuming an inflation rate of 7%, annualized pre- and post-retirement returns of 12% and 8%, respectively, you would need to save and invest about Rs.19,000 per month for the next 26 years to generate a corpus of close to Rs.4 crore that you would need at the time of your retirement. Of course, you can always have a plan to start with a smaller amount and keep increasing it over the years.The second thing to note is that given the long term for which you will be investing, you should choose an appropriately aggressive asset allocation with maximum exposure to the equity markets (all segments: large, medium, and small companies) both in India and, to a lesser extent, overseas. Apart from this, you should also make sure that you are not perturbed by the volatility of the markets during the tenor of the investment. Over the long term of your investment, the ups and downs of the markets will even out and yield a healthy return. So, it is essential that you eschew the temptation to time the market or stop/restart your systematic investment plans based on your perception of where the market is at any given time.The last thing to remember is to not leave the portfolio totally unattended. First, you should keep your retirement portfolio segregated from the rest of your investments so that you can track it separately. Secondly, you should review the funds in the portfolio every year or two to ensure that they are performing well. Is it a good time to invest in fixed maturity plans (FMPs)? I am not much of a risk taker. —K. Srinivasan FMPs are closed-ended mutual funds that invest exclusively in the debt market. They are good in a scenario where the interest rates are either at or near peak values and are expected to go down in future. At this time, consensus opinion is that we are in such a situation and hence, yes, it is a good time to invest in FMPs.

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