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How Much Should You Have In Your Portfolio As Per Your Age

How to Measure Age-Based Portfolio Benchmarks

Are you on the right track with your savings and investments? Many believe that a massive portfolio is the key to success, but our insights might surprise you. Discover age-based benchmarks to help you build a portfolio that fits your life, goals, and dreams.

The Context

For countless investors, the burning question remains: “Am I truly succeeding in my savings and investment endeavors?”

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Photo credit: Leeloo The First

While novice investors often fixate on weekly, monthly, or annual returns like clockwork, seasoned individuals seek out more sophisticated metrics. At first glance, it may seem simplethe net value of your investment portfolio serves as the defining factor in determining whether you’re on the right track. But is the sheer size of the portfolio, whether it be in thousands, lakhs, or even crores, the sole indicator of success? Or does success encompass more than just a colossal sum?

Interestingly, our observations indicate that many investors harbor the belief that the absolute size of their portfolio serves as the benchmark for measuring success. However, the reality may surprise you. In truth, the absolute value of your portfolio might not be the most accurate gauge of triumph. Instead, success lies in a relative comparison that takes into account various factors, such as your earnings, lifestyle, and individual requirements.

If you’re eager to unravel this intriguing mystery, join us as we dive deeper into the topic, guiding you toward a more holistic understanding of how much you should have in your portfolio based on your age also referred to as age-based benchmarks.

The Mechanics At Play

Imagine your investment portfolio as a well-oiled machine, composed of various moving parts that work in harmony to generate compounding returns during the accumulation phase or provide sufficient passive income for a fulfilling retirement. These moving parts encompass a thoughtful arrangement of stocks, bonds, real estate, metals, and even alternative investments like art or antiques. However, the specific mix and total value of these components depend on each individual’s unique circumstances, including risk appetite, time horizon, income stability, and earning capacity.

The net size of your portfolio, on the other hand, evolves, influenced by your age and stage of life. While some individuals start their investment journey early on, others may initiate it later. Nevertheless, it is crucial to expand the size of your portfolio by certain fixed age-based benchmarks.

This approach ensures a balance between diligently bridging potential gaps at an accelerated pace, if necessary, and allowing yourself to slow down and focus on the quality of life as you progress. After all, life is finite, and it’s essential to strike a harmonious balance between financial growth and enjoying the fruits of your labor.

Irrespective of your initial position, the paramount objective remains to establish a portfolio that not only generates significant returns but also harmonizes with your envisioned lifestyle and future aspirations. So, “What should be the ideal amount of savings at different stages of our lives?” To shed light on this matter, let’s explore some age-based benchmarks that can guide you toward making informed decisions about your investment portfolio.

1. Age 20-30

Laying the Foundation for Future Growth

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Photo credit: Helena Lopes

During your early twenties, you have the advantage of time on your side. This is the opportune moment to start building your investment portfolio. Financial experts suggest aiming for a portfolio size equivalent to your annual income.

For instance, if your annual income is ₹10 lakh, aim to have a portfolio value in the same range. As a young investor, prioritize diversification, allocating a higher weight to equities or stocks of reputable companies. This strategy allows you to capitalize on the advantages of time and compounding.

2. Age 31-40

Accelerating Growth & Taking Calculated Risks

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Photo credit: Canva Studio

By the time you reach your thirties, your career may have progressed, increasing your income. At this stage, consider targeting a portfolio size that is double your annual income.

For instance, if your yearly earnings are ₹20 lakhs, aim for a portfolio value of approximately ₹40 lakhs. It’s important to strike a balance between growth-oriented investments and risk management strategies to maximize your returns.

3. Age 41-50

Balancing Stability & Growth

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Photo credit: Anna Shvets

As you enter your forties, stability becomes a key consideration alongside continued growth. It is advisable to have a portfolio size that is three to four times your annual income.

For instance, if your yearly income is ₹40 lakhs, strive for a portfolio value ranging from ₹1.2 crore to ₹1.6 crore. It’s a golden decade to diversify your investments across different asset classes, including stocks, bonds, commodities, and real estate, to mitigate risk and maintain a steady upward trajectory.

4. Age 51-60

Preserving Capital & Preparing for Retirement

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Photo credit: Andrea Piacquadio

As retirement comes into view, it’s crucial to reassess your portfolio and prioritize capital preservation. At this stage, aim for a portfolio size that is five to six times your annual income.

If you earn ₹60 lakhs per year, strive to have a portfolio worth ₹3 crores to ₹3.6 crores. Consider gradually transitioning to more conservative investment options, such as bonds and fixed-income securities, to protect your hard-earned wealth.

5. Age 61 & Beyond

Securing a Comfortable Retirement

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Photo credit: Karolina Grabowska

As you approach retirement, the primary objective shifts to securing a comfortable and stable income stream. Experts recommend having a portfolio size equivalent to eight to ten times your annual income.

For example, if your annual income amounts to ₹80 lakhs, strive to achieve a portfolio value between ₹6.4 crores and ₹8 crores. This phase presents a decade to consolidate any fragmented investments and emphasize capital preservation, income-generating assets, and a slightly defensive diversification strategy. These measures aim to facilitate a seamless transition into retirement, ensuring financial stability during this crucial life stage.

Conclusion

In the pursuit of financial well-being, the notion that “more is better” often prevails. However, relentlessly striving for larger portfolio sizes can hinder our ability to enjoy life’s pleasures along the way. While age-based benchmarks offer a good starting point, it’s crucial to acknowledge that your financial circumstances are unique and may require personalized consideration.

If you feel behind after reading this article, avoid succumbing to anxiety and instead focus on recalibrating your savings and investment strategies to align with your goals. Consistency in your approach is key as you navigate through life’s stages. If uncertainties arise, seek guidance from a licensed financial advisor who can help tailor these guidelines to your specific situation.

As we conclude, remember that the true measure of a successful portfolio goes beyond mere numbers. Take the insights from this article and embark on your journey to build a portfolio that aligns with your unique goals, values, and aspirations.

Invest wisely!

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