what is equity investment? why should one invest in equity even after retirement?

equity investment is an investment in a company's capital divided into smaller units, known as equity shares. equity shareholders are owners of a company who purchase its shares and earn income through dividends and capital appreciation. investors can purchase shares of different companies through the stock market.

however, one needs to practice caution as the stock markets can be volatile and, therefore, involve some risk level, just as any other form of investment. it is also why people nearing retirement are advised to steer clear of equity investments. but when it comes to looking at actual returns, none of the investments has fared as well as equity investments. even if nearing retirement, one should maintain a portfolio of quality stocks that will yield a good return in the long term.

systematic investment planning (sip) is the best way to invest when it comes to equity investments. calculate sip with the help of a sip calculator. the volatility in the equity markets can be a deterrent for many to invest in lumpsum in equity shares. hence, equated sips that can be parked periodically into equity-oriented investments proves to be a safer bet, especially for people nearing retirement.

how much should be invested?

investments into equities depend upon many individual factors such as personal goals, aspirations and risk appetite. however, experts suggest that the investment should be 100 minus the investor's age as a thumb rule. assuming 55 as the retirement age, people retiring in 30 years or more should keep at least 50% of funds invested in equity shares. this investment should come down as years pass by and the risk-taking capacity of the investor decreases. according to wealth planners, a well-researched equity portfolio built with intelligence throughout one's career is the key to accumulating a significant retirement fund.

what are the avenues for equity investing?

while direct equity investments are one option, the other option is to go via equity mutual fund schemes. a mutual fund sip calculator should be used to arrive at monthly sips. these schemes should be diversified into large-cap funds, which are less risky overall and sit well with people looking to retire. mid-cap and small-cap funds should be considered, too, as they end up giving high returns, though there is more risk factor attached to it. sip return calculator helps to arrive at returns that will get generated through investments in these funds.

while investing in mid-cap stocks, consider sectors such as pharmaceutical, automobile and fmcg as these are considered relatively safer and have a good record. other sectors that may prove to be worthy of investments are banking funds, nbfc funds, automobile and capital goods funds, which offer good growth once there is an upward market trend into capital expenditure.

when it comes to deciding on the strategy for equity investments, a time horizon of five to seven years should be kept in mind, as most economical or business cycles last for only this period. after this, they should adopt a different strategy to stay invested by monitoring their investment portfolio to remain up-to-date with the market trends.

monitoring portfolio

the easy part is to pick out quality stocks and build a portfolio. the challenging part is to keep it growing by monitoring it continuously, especially in later years of life. as a general rule, look into the portfolio at regular intervals of three to six months and keep in touch with the advisor to stay on top of one's investments.

conclusion

the best approach to equity investments is that one should stay invested in them, but the portfolio's asset allocation should be based upon one's age and risk appetite. it is also a good idea to meet with a financial advisor who can guide the present and future scenarios.