Satyendra told me, "Aditi, inflation is such a bummer, everything is getting so expensive. A colleague suggested to me that I should invest in equities as they give good long-term returns for a retirement benefit. So, I invested in equities and suffered tremendous losses during this market fall. I am okay with waiting, but unhappy about the huge loss. I have told Sunder to invest in equity, but he doesn't want to."

Sunder cut-in, "I don't like this market tension. As it is already, I have many things to worry about. Although I do want to invest for my retirement, not like my brother. I would invest in Bank FDs."

Exhibiting their twin connection, they asked in unison: "Aditi, we are just worried about our retirement because of so many expenses to deal with and we want to have it peacefully. What should we do?"

I finally blurted, "You are both victims of bad investment decisions."

"How?" they exclaimed in chorus.

I continued, "Satyendra took a colleague's advice to invest and followed him blindly while Sunder is ignoring the long-term benefits by avoiding risky assets."

[Read: Avoid These Mistakes While Planning For Your Blissful Retirement]

Foremost understand that investing is an individualistic exercise, it should never be done by following any investment viz, friend, relative or not even parents or siblings. This is because everyone needs and desires although are similar, yet their timeline to achieve them differs along with risk profile.

And if you are thinking to invest for your retirement, a biggest and important long-term goal, then ask yourself, 'At what age do I want to retire?' Only then you can estimate the time and the investment amount you require for building a retirement corpus.

Eagerly they asked, "What should we do?"

• Create a goal based financial plan and add a timeline to it including your time of retirement (early or late)
   
• Consider the time you have in hand (estimate the number of years) before you retire so you can estimate the amount required for retirement based on the inflation
   
• Assess your income source; draw up your net worth chart
   
• Consider your risk profile based on your age, the time before you retire, the source of income and willingness to take the risk.
   
• Based on your risk profile choose the appropriate optimum asset allocation strategy that is balanced and equally well diversified.
   
• Save and Invest more while you are still working
   
• Cut down expenses and continue investing diligently.

In my view, all these are steps required to achieve a blissful retirement. But the true essence is having a sound investment approach (personalised asset allocation) knowing your own needs, fund availability, and being aware of the risk of each available investment avenue chosen.

By allocating your investments across various asset classes, you manage to minimize risk and possibly increase gains in the long run.

[Read: Asset Allocation: Hocus-Pocus Or The Essence Of Successful Investing?]

Asset allocation may sound like a complicated concept, but it isn't!

As you may be aware, the potential of a return rises with the rise in risk. While you can maximise your return by taking the maximum risk, you should not forget that you are allocating your portfolio across assets to minimize the level of risk for a certain level of expected return.

Have a fair diversification across asset classes that do not have a direct or positive correlation to each other. Basically, a healthy portfolio takes exposure to any/all asset class which does not gain or lose at the same point of time. You would not like to see all assets in your portfolio tumbling down at the same point of time.

Ideally, as a thumb rule, the proportion of debt investment should be equal to your age. So, if you are a 32-year-old, 32% of the investible surplus can be parked in debt and the remaining 68% in equity as an asset class.

However, this is just one way of doing it. Hence consider a personalised asset allocation as mentioned earlier. With advancing age, the asset allocation should change because the ability to bear risk has diminished. Similarly, capital preservation is the main concern when you are nearing retirement because the time horizon is shorter.

Table 1: Risk-taking as per age

Your Age (in Years)	25	35	45	55	65	75
Your Risk-Taking Capability	HIGH       ➝     MEDIUM       ➝     LOW

(For illustrative purpose)

For example, if your personal income is good, live in a double-income family, do not have many liabilities to shoulder, you are young, have financial goals that are far away; you might be okay to bear loss as you have many years to retire. Similarly, a 53-year-old approaching his retirement in the next five years would focus on saving and unwilling to bear the risk.

Table 2: Risk-taking based on time horizon

Time Horizon (Years)	30	25	20	15	10	5
Your Risk-Taking Capability	HIGH      ➝     MEDIUM       ➝     LOW

(For illustrative purpose)

Conclusion:

Don't forget that each one's age, risk profile, the financial circumstance is different. Hence assess your financial needs to devise a worthy strategy and chart out your personalized asset allocation plan.

While different assets may have different moods based on the market fluctuations, a proper allocation across asset class and investment style may protect you from significant ups and downs of any single asset class and scheme in your portfolio.

Table 3: Indicative Category wise Allocation for One's Retirement Portfolio

Age Group	25-35	35-45	45-55	55-60	Above 60
Category	Very Aggressive	Aggressive	Moderate	Conservative	Very Conservative
Equity	90%-100%	75%-80%	60%-70%	40%-50%	20%-30%
Large Cap Funds	10%-15%	10%-15%	10%-15%	15%-20%	10%-15%
Midcap Funds	20%-25%	15%-20%	--	--	--
Large & Midcap Funds	20%-25%	15%-20%	10%-15%	--	--
Multi Cap Funds	15%-20%	15%-20%	10%-15%	--	--
Value Style Funds	15%-20%	10%-15%	10%-15%	10%-15%	0%-10%
Aggressive Hybrid Fund	--	--	10%-15%	15%-20%	10%-15%
Debt	0%-5%	10%-15%	20%-30%	40%-50%	70%-80%
Dynamic Bond Funds	0%-5%	10%-15%	10%-15%	20%-25%	15%-20%
Short Duration / Corporate Bond Funds	--	--	10%-15%	20%-25%	25%-30%
Liquid / Ultra Short Duration Funds	--	--	--	0%-10%	20%-30%
Gold	0%-5%	5%-10%	5%-10%	5%-10%	0%-5%
Gold Funds	0%-5%	5%-10%	5%-10%	5%-10%	0%-5%
	100.0%	100.0%	100.0%	100.0%	100.0%

This table is for illustration purpose only.
(Source: PersonalFN Research)

[Read: Best SIPs To Invest in 2019]

Finally, both the twins agreed, contacted PersonalFN's financial planners to get their own personalised asset allocation strategy planned. PersonalFN has been offering unbiased, customised and research-based solutions to their clients from the last 18 years and made their retirement planning stress-free.

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