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It’s Her Life, She Has To Plan It Herself

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It’s Her Life, She Has To Plan It Herself
Jyotika Sood - 02 August 2021

Women in India are now making different choices, one of them is staying single. For such women, financial planning for retirement is all the more important to ensure their independence. In an interview, Ventura Securities Director Juzer Gabajiwala tells Jyotika Sood the retirement mantras for single women. Excerpts from the interaction:

What kind of financial planning is required for a single woman before she retires?

For a single woman, the most important financial goal is retirement since they would not be having any support system, especially after their retirement. There can be many other ancillary goals like travel, buying a house, or a car. In a country like India, the private sector does not provide pensions and there is no government social security programme. They need to be meticulous about their retirement planning. There would be no life insurance needed as the person would not have any dependents but medical insurance is necessary and it should be there at any cost.

What kind of investment she should make? Do you think she should be aggressive about it?

Depending on the age, she can be a bit aggressive in her investment approach and she should allocate the major part of her portfolio to equity in case the retirement is more than 10 years away. Equity will help to generate higher returns. Since she is investing for a longer period, the risk in equity investment will automatically come down. Equity should be an inevitable part of her portfolio.

Would you suggest her to invest more in assets like real estate or gold, or in mutual funds and SIPs?

If she already owns a house, then she should avoid real estate for investment because the capital appreciation in real estate is very low. In addition, the rent-to-price ratio is also very low. It is around 2-3 per cent now. Therefore, it is better to avoid real estate as far as possible. A small portion of around 5-10 per cent can be invested in gold for hedging purpose, as gold is a good hedge against equity. Depending on their knowledge and risk-taking capabilities, they can invest in either direct equity or through a mutual fund route. SIP is the best mode for anyone to generate long-term wealth. In a mutual fund, the majority of the allocation should be towards equity funds. This is because SIP in equity funds will compound your investment and help you achieve desired wealth for your financial goal.

What should be a portfolio arrangement according to age?

Asset allocation is not a one-time activity. It is a continuous process. The portfolio should be managed dynamically by making continuous assessments of its asset allocation at a regular interval. As the age of the investor increases, she should bring down her equity allocation and increase her proportion towards safer investments like debt funds.

A conservative investor can reduce the equity allocation by 5 per cent as compared to a moderate investor whereas aggressive investors can increase by the same percentage based on each of their risk appetite. A typical asset collocation for a moderate risk-taker investor can be like this: 

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