There's a common belief that the sooner you start investing, the higher your chances will be of accumulating a substantial corpus of wealth. While that is true, there are late bloomers, who are people in their 40s, who may not have so far started investing due to whatever reasons. When you have just stepped into 40, you have certain advantages over your younger counterparts- you have the maturity and the wisdom to be more responsible with your money. You have around 20 years ahead of you, considering 60 is the retirement age, and you need to plan your finances accordingly.
Identify Your Goals And Commitments: “Financial planning is the starting point. If you're in your 40s and you haven't started investing, the first and foremost activity you need to do is to identify and set your commitments and financial goals in life. Otherwise, channeling savings into investments may go haywire. Without comparing your financial position with others, you need to minutely consider your cash flow,” says Arijit Sen, a Sebi-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial advisory firm.
Once the family budget is set, one can figure out the potential surplus available for investments. Once the goals for which investments are to be made, respective time horizons, risk profiles, and macroeconomic factors are considered, product-suitability analysis comes into the picture. “Investment strategies will always depend upon the time horizon of an investment, objective of investment, prevalent market situation, risk profile of the investor along with other subjective parameters,” adds Sen.
Assess Retirement Needs: By this age, people usually have a sense of their retirement needs. Hence, one can accordingly talk to a financial advisor or tweak their investments to allocate a higher portion as retirement corpus.
Start A Monthly Systematic Investment Plan (SIP): Starting today, is the best time to start, doesn't matter that you're 40. “Start basic, start small, but learn fast as you have to catch up. Start a monthly SIP of a small amount and once you're comfortable with that in say four months, start more. Keep your target that you'll double the SIP amount by the end of the year. Don't touch this amount for anything. This is your money for tomorrow. Then start a small SIP for your short-term goals, keep it simple, and don't over-commit,” says Shweta Jain, founder of Investography.
“Review your portfolio at the end of the year. Give yourself time to ensure you grow your money. Remember starting late is fine, but not committing to it after starting late isn't. You have a few more decades to grow your money, take advantage of that,” adds Jain.
Pay Off Your Loans/Debt: By the age of 40, you must have a low debt profile. Try to close off your existing loans and debts as soon as possible. A higher debt can delay your retirement plans and it is not good for your credit score.
Regular Investments: In your 40s, it's usually advised to opt for low-risk investments. Depending on your risk appetite, goals, and investment horizon, you can choose a suitable mutual fund scheme. It would be better to go for debt funds as they are low-risk rather than equity funds. Or you could also go for hybrid schemes.
Invest Your EPF money: Typically, a person in his 40s would have money saved up in an employee provident fund (EPF). You can withdraw that money and invest in large-cap or index funds. Moreover, if you get extra money from any side income, side hustle, bonus, or appraisal, you could add that to the investment too.
Appoint A Financial Advisor: Last but not least, it would be ideal to take the help of a professional financial advisor to take care of your investments at this juncture, wherein they advise you based on the market conditions.
