Asset Allocations by Age 40, 50 & 55

What should be the Asset allocation by the Age 40, 50 & 55?

Let us today discuss something about the Asset allocation. Those who don’t know anything about What is Asset Allocation and why is it important, please first of all basics of asset allocation from the right side bar of this blog.

Asset allocation should be different for different age groups, risk appetite and need for capital after retirement. As a rule of thumb, there are two formulas for asset allocation.

Asset Allocation: 100 – Your Age = Equity Allocation of your Portfolio and rest should be in Debt and other Asset classes.

Modified Asset Allocation: 120 – Your Age = Equity Allocation of your Portfolio and rest should be in Debt and other Asset Classes.

The modified formula is mainly for people who are willing to take high risk. According to the basic formula of asset allocation the Equity Allocation for people having age 40, 50 & 55 should be 60% (100-40), 50% (100-50) and 45% (100-55). And rest should be in Debt, Gold or any other Asset classes.

Now, many people don’t agree with this formulas also. Because they have been advised by the so called Financial Planners that, the age of 55 years is the age which is very much near to the retirement and at this age 45% allocation in Equity is risky. So Before 5 years of retirement, means at the age of 55, one should shift their money from equity to 100% debt.

But according to the new theory, one should continue investing in equity even after the retirement to beat the inflation & tax – the 2 major money killers. According to the new theories, it is advisable to continue investing in equities even after retirement to protect your wealth from Inflation & tax….

In short, Equity allocation in your portfolio is MUST even after your retirement. Equity should be pass on from generation to generations…..