We are not a very equity oriented nation – and I am not blaming anybody – just stating the facts. I know there are many reasons, but that is for the regulator and the Government of the country to worry about, not this blog.

What happens if say you are 28 years of age, earning about Rs. 600,000 gross salary, and wish to start investing / saving for your retirement? Let us assume that you are willing to save about 10% of your gross income for your retirement. This means you will invest about Rs. 60,000 per annum…and this amount will keep increasing at say 10% every year for the next 30 years.

Assuming that you invest the whole amount in an ELSS (an equity oriented fund) with tax benefits, and assuming that it grows at 12% per annum (remember it is tax free as of now) the amount will be Rs. 6 crores.

If you decided to invest it in a debt oriented fund like a pension plan + ppf as a combination you could end up with about Rs.3 crores as corpus!! What can you do to remedy the situation? Simple save more. How much more? Well, about 50% more. So your annual contribution will have to go up from 60k to 90k per annum NOW. In monthly terms it means you will have to save Rs. 7500 per month and keep up the tempo for all times. Not impossible, but seems like a big stretch, right?

This is a standard that most people will struggle to meet. I mean meet consistently while dodging student loans, car loans, housing loans, lifestyle expenses, kids, etc.

I am not suggesting chuck all your debt investments and put all the money into equity. You will not get some outsized gains in equity and use that as an excuse to save/invest less. Just saying that even a small 2% difference in the returns over a 30 year period will create a dramatically higher corpus if you have equity in your portfolio. You could start with a 100% equity at age 28 and add debt by the time you are about 45 years of age – the heady 17 year equity run could dramatically increase the size of the corpus..and then you could add more debt – say 40% debt till the age of 60 when you retire. Play around with excel and see what is the impact of the various permutations and combinations of asset allocation. Obviously you will choose a plan that suits your palette, not what I am suggesting.

Open your mind to having equities in your retirement portfolio – in fact deep into your retirement too you need to have equity. Of course if you have built a huge corpus, at the age of 80 you may be able to shift to a debt only portfolio, but not before that. Please do not blame me for that. Blame your genes. You are going to live till 93 and your wife also till her age of 93. Since you married a girl 5 years younger than you , it means your money needs to last till YOUR age of 98. Immaterial of how long you live. Ha.

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