Managing your Retirement money

The question is how different it is to manage larger sums of money compared to a few lakhs when one is young.

The question is how different it is to manage larger sums of money compared to a few lakhs when one is young.

My view is it becomes simpler if you know what you are doing. By the time you are 45/50 you already know who you are, what is your risk appetite, what are your goals, what are your characteristics as an investor and spender. These behaviors are more important than selection of the illusive best stock or best mutual fund scheme.

Once you know your financial goals and if you can invest intelligently to accumulate an amount close to that amount then you are safe. You can then think of protection of your corpus and how you will draw from the corpus in retirement.

The important thing is that the more factor of safety you have the more you can take risk, that is stay longer and invest more in equity. In theory that gives you more chances of having a larger corpus at death to be left for your heirs.

If you have only just about adequate sum at the time of retirement then you must have the safety first approach thus invest more in debt so that capital erosion is avoided as much as possible. But if you have 30-40%more than what you need for the retirement duration then you can take risk and continue in equity.

Again this depends on your investment behavior. I have seen people worrying too much about stock market movement who have a portfolio of less than 1 lac and earning more than that in a month. And there are others who may have crores in their portfolio but can take 5% drop in a day in their strides. As you age you know who you are and then behave accordingly. It’s a personal matter and there is no right or wrong in it.

Personally I can keep my cool about market gyrations, so I can keep a larger sum in equity even though I am retired. But that is just me. Another person should follow a completely different route.

Another point is more money does not mean more stocks or more mutual fund schemes. It is just you have more units of selected stocks or mutual fund schemes. Thus there is no additional burden to track as you accumulate more money on the way.

So young men and women, do not worry unnecessarily about the future, concentrate on the corpus building, do experiment with different investment products with lower sums and try to understand yourself. It may sound easy, but it is not. Also, concentrate on other things in life, money is only a small part of life it is NOT life, it is just an enabler, by itself it does not give you any joy or happiness. Thus you need both good health and company of friends and family to enjoy what money can buy.