Age-Based Asset Allocation: Often, people start investing but don't understand where and how much money to invest at different ages. Without proper asset allocation, the risk can be too high or the returns too low. In fact, your income, responsibilities, and risk tolerance change with age. Therefore, it's crucial to adjust your asset allocation according to your age. If you also want to build a strong financial future in the long term, understand these important points.

First, understand what asset allocation is.

Asset allocation means dividing your total investment across different asset classes such as equity, debt, gold, and cash. The goal is to control risk and optimize returns. The same asset allocation is not considered suitable for all ages.

Ages 20-30: The Right Time to Take Risks
This age is considered the best time to start investing. Responsibilities are fewer, and you have a long time horizon.

Recommended Asset Allocation:
Equity: 60–70%
Debt: 20–30%
Gold/Other: 5–10%
At this age, you can earn good returns from the stock market and equity mutual funds. There's no need to panic about market fluctuations because time is on your side.

Ages 30-40: Balancing is Essential
In this phase, responsibilities like marriage, children's education, and buying a house increase. Therefore, a balance between risk and safety becomes crucial.

Recommended Asset Allocation:
Equity: 50–60%
Debt: 30–35%
Gold/Other: 10%
Continuing to invest through SIPs (Systematic Investment Plans) is beneficial at this age. Creating an emergency fund is also very important.

Ages 40-50: Focus on Capital Protection

Retirement is not far away now. Therefore, gradually reducing the equity portion is a wise decision. How should asset allocation be done?
Equity: 40–45%
Debt: 40–45%
Gold: 10–15%
The goal here should be to protect the capital you have built and ensure stable returns.

Ages 50-60: Avoiding risk is crucial
At this age, sources of income tend to become limited, and retirement is approaching.

How should asset allocation be done?

Equity: 25–30%
Debt: 55–60%
Gold/Other: 10–15%
It is advisable to rely more on debt instruments such as FDs, Senior Citizen Savings Schemes, and debt funds.

After 60 years of age: Income and stability are paramount
After retirement, the biggest focus should be on regular income and capital protection.

How should asset allocation be done?
Equity: 10–20%
Debt: 65–70%
Gold/Cash: 10–15%
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Here, you should avoid taking too much risk and choose safe investment options.

Keep these points in mind while doing asset allocation:
Review your investment portfolio as you age.
Do not depend on a single asset class.
Invest according to your financial goals.
Seek the help of a financial advisor if needed.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.