All you need to know about Lifecycle Investing

Lifecycle Investing
• This approach to investing takes your age and
life situation into account and accordingly
allocates funds to growth and defensive
assets.
• This helps optimize the risk in the portfolio
and generates superior returns for the
investor.
 1. Young & single
• Be aggressive on stocks: Your income may not be
high, but neither are your liabilities if your
parents aren't dependent on you. Binge on
stocks as time is on your side.
Insurance
• Buy a term cover equal to 8-10 times your gross
annual income.
• Get a health family floater policy for yourself and
parents.  
Asset Allocation
 2. Just married
• Reduce risk in portfolio: Family income increases
if wife works. Reduce allocation to equity and
increase debt portion. If servicing a home loan,
use any windfall gain for prepayment.
Insurance
• Buy additional cover for protection against home
loan.
• Include wife in family floater health cover.
Asset Allocation
 3. Starting a family
• Chalk out long-term goals: Cut exposure to
equity further. Start saving for children's
education and marriage. Earmark specific
investments for these goals.
Insurance
• Enhance life cover to take care of long-term
goals. This is crucial if the family has moved to
single income.
• Include children in health insurance cover.
Asset Allocation
 4. Grown-up children
• Adopt a balanced approach: Reduce risk by
slashing equity exposure. Shift money to short-
term debt funds three years before you start
drawing down from the portfolio for children's
education and marriage.
• Home upgradation loan
Draw down from fixed-income portion
• Insurance
Buy critical illness cover for self and wife.
Asset Allocation
 5. Retired
• Focus on safety, not returns: You now depend on
the income from investments, so keep the risk
very low. But inflation means you can't avoid
equity.
Insurance
• Ensure adequate health insurance. Enhance
protection with a contingency fund.
• If all loans are paid and liabilities taken care of,
then you don't need life insurance.
Asset Allocation