“Life is too short. Enjoy it while it lasts. Enjoy the money till it lasts. Now is the time to utilize the money I have”

“I want to be a millionaire when i retire and should have more than enough to enjoy my retirement.”

These are two schools of thoughts. Is any of it wrong?

No. It is purely a different outlook to life!

Stock Market, Fixed deposits, Bonds, Mutual funds. So many options to invest but spoilt for choice! How do i decide where to invest and how much?

Now that is a question which is so difficult to answer. There have been various answers from different people.

‘Do not put all your eggs in one basket’  implies that one should not put all his investments in one category.

The first answer and the most popular one has been to subtract your age from 100. That percentage should be invested in equity and the remaining  in debt.

For example if one is 30 years old, he should allocate 70% of his funds to equity and 30% to debt.

(Investing directly in the stock market, equity based mutual funds fall into the category of equity.

FDs, Bonds, Gold, PPF and Post Office investments fall under the debt funds.)

However, the above rule cannot be applied to all. This formula was used when 60 was considered an age when one retires and then banks on his investments for his regular income. Things now can be different.

There are questions you need to ask yourself.

When do I want to start using my investments?

One sees people retiring much earlier and shifting to passion based work.

Another category of people who do not want to retire at all.

A third category of people who want to leave their investments for their future generations specially in India.

What is my risk profile?

This rule cannot be a universal rule also because everybody has a different risk profile.

Some investors are prepared to take higher risks while some investors are conservative and don’t want to compromise on safety for higher returns.

So rules now have to be altered to suit everybody’s needs and purpose.

In short there is no fixed formula but an individual choice depending on various individual factors.

So what does your Asset allocation look like?