You hear many people tell you that when you are young you can take more risk.
Let me explain this better.
When you are young (say 22-35 years of age) you start investing small amounts in equity mutual funds. Let us say you started doing a SIP when you were 24 years of age with a princely sum of Rs. 2000. By the time YOU reached 30 years of age the SIP amount has say increased to Rs. 30,000 per month and it reached Rs. 50k per month when you are 35 (your current age). This is not a bad amount – especially if you are paying an EMI for a house / car etc.
Can you afford to put all this money in equities and equity oriented debt funds like Hdfc Prudence? The answer is yes, especially if you have a Provident fund – and there is a pf deduction also from her salary. You are still only about 70-80% in equity.
Suppose at this stage the market falls say 20% will it not hurt you? Of course it will. It will hurt badly. HOWEVER IN A GOOD PORTFOLIO IT IS NOT THE VOLATILITY THAT HURTS, it is the permanent dimmunition in capital – like buying ADAG’s Reliance Power – bought at 465 and now selling at Rs. 45….
So the younger you are, the LESS WORRIED YOU SHOULD BE of volatility. Permanent loss of capital, inflation, not being able to meet goals, ….these are the risks that you should be worrying about.
If you are worried about a temporary jerk in the market, go and read your risk chapters again….
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