WHAT SHOULD YOU BE INVESTED IN YOUR 40S?

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Investors who are financially aware since a young age often begin their mutual fund investment journey from a young age – often in their 20s – mostly from their first pay cheque. However, you must be aware that it takes a decent amount of time to reach a point where in you can completely claim that you have complete financial independence. Basically, when you are at this stage, you understand the importance of saving and creating a financial plan and you mostly have a systematic and disciplined approach towards your mutual fund investments.

Usually, by the time an individual reaches 40 years of age, they not only have a family to tend to that comprises of their spouse, and/or children, but also a set of elderly parents. Hence, it is of utmost importance that you must invest in the right set of investment options at this age. At this point, when you have a high level of financial burden on your shoulders, good investments can come to your rescue. Let’s understand these different types of investment that can come handy when you are in your 40s.

Growth assets

These assets include those type of investments that help to produce capital as their value increase over time. The power of compounding is one of the effects that play a significant role in increasing the original value of the investments and producing wealth. Some examples of growth assets include real estate, equities, etc. These investment options are an excellent choice to tend to your long-term goals of eight to ten years or more. Long-term financial goal can be anything from your child’s education or their marriage, or investing to cater to your retirement goals. These investment options also help to beat the negative effects of inflation when invested for a long duration. If you are an investor in their 40s, make sure that you have enough of such assets in your investment portfolio.

Emergency corpus

Having an emergency corpus in place can be a huge lifesaver during contingencies such as home repair, sudden death of a close family member, job loss, etc. In the time of need, an emergency fund can act as financial net. It is advised to set aside around up to six months of your living expenses. Emergency funds can be parked in highly liquid instruments such as liquid funds.

Go for more mutual fund investments
If you still have some sum of money left after tending to your financial goals (long-term or short-term), having a proper health insurance policy, creating an emergency fund, clearing your debts, then you can allot some amount of money to alternate investment options. This will boost returns on your mutual fund investments and help you reach your financial goals quickly.

However, whatever type of investment you choose to go forth with, remember that each investment option has a certain ratio of risk-returns. Ensure that your risk appetite aligns with the investment’s risk ratio. Happy investing!