When you are doing asset allocation, estimating time horizon is very important. Most people coming to meet me start by saying “Well, I am 54 years of age…insecure about my job and even in a regular scenario, I will retire at 58 years of age ..so I do not have a LONG time horizon”.

Or a 27 year old who comes and says “I want to invest money for a real long time…say like 10 years”. By the way Subra can I use this money to make a down payment for my house in say 2 YEARS TIME?

I am sure you are getting the hang of the article. The time frame has very little to do with your age. It has to do with your goals. The first couple who came to me were 54 and 46 years of age. The wife was no longer earning, and was a house wife over the past 14 years when they had a second kid.

The husband said he has a short time frame but he wanted that money “to be available to them in their old age”. On probing I found out that the wife had a 88 year old grandfather and a 82 year old grandmother.

Now see how things change. The money had to be available for their old age. She could technically live till her age of 100 – her grandparents seem to be headed there themselves. So this man’s money was actually going to remain invested MAYBE for 50 more years! That was long term – it rarely got longer for wealth creation goals (same generation).

The young boy aged 27 years was looking at a much, much shorter time frame for his money. He wanted to ‘grow’ it in 2 years and put it for down payment for a house! what a contrast.

When you have money to invest, be CLEAR about your goals. Write it down if need be. Talk to your spouse about why equity, how to withdraw for the goal, who is going to be the nominee,…because you do not maintain an Investment diary. If you die, your wife will not know why what investments were made.

Sorry for the digression!

When your money is for 50 years (or even 5 years), there is no doubt that it should be in equity. Even in equity you can be more aggressive than some of the others. You can choose some Large cap Index fund (bse, nse, does not matter), some money in a mid cap fund, and some small money in small cap/ micro cap.

You need to look at this portfolio on a regular basis and decide on course correction IF NEED BE.