The year 2020 has filled with revolutionary developments in the medical and information technology sectors. It’s time to look ahead to the New Year for equity investment opportunities in these sectors. There is a high possibility of economic recovery in 2021. Maybe your investment portfolio has been crushed with slug stocks during the pandemic. But the New Year is giving recovery bells after the vaccine arrival for the pandemic.
If you are looking for investing your retirement money, you can consider the stock market besides savings schemes. You may consider intraday trading as well but only after going through enough research and gaining knowledge as it is your retirement corpus and retirees requires a war chest of safe money. It is a general guidepost to take advantage of the stock market with caution. Today you will get to know about bucketing strategy which involves planning your retirement withdrawals with different time segments or buckets.
Retirement Bucket Portfolio is designed for people who are already retired whose investments needed to fund their living expenses therefore it is necessary that funds remain in cash or liquid assets. And assets should be diversified in such a way that a cash buffer provides peace of mind.
Retirement Bucket portfolios can be divided by time horizons -
Bucket 1: Short-term horizon
Bucket 2: Intermediate holding period
Bucket 3: Long-term period
The basic idea is that you want to keep your portfolio structured that can keep money safe and keep growing even after specified expenditures.
If you have a long-term spending horizon, you can venture into higher-returning stocks that have this potential. But it wouldn't work for investors with near-term spending requirements. For example, if you want to spend after 2027, you can put your funds into riskier investments. But if you have a short-term spending horizon, you need to step out on the risk spectrum and if you have a mid-term horizon, you can venture into high-quality bonds.
Your portfolio is likely to get benefited in 2021 with Consumer Discretionary Stocks, Energy Stocks, Healthcare Stocks, Information Technology Stocks. Be ready to take benefits from the stock market. Have your demat account with a reliable stockbroker. Demat meaning is simply the digital form of securities.
Other Schemes that you can consider to invest your retirement corpus are enlisted below:
Senior Citizen Savings Scheme (SCSS)
Retirees can allocate up to Rs. 15 lakhs under this government-backed scheme at the interest of 7.4% for 5 years that can be extended further for 3 years.
You can open multiple fixed deposit accounts to invest your funds. There is no limit to open FD accounts with any maximum deposit amount limit. You can earn higher interest rates on corporate FDs as compared to a bank FD and post office FD.
Post Office Monthly Income Scheme
You can allocate up to 4.5 lakhs of your funds under this scheme for 5 years. If you are opening a joining account, you can deposit up to 9 lakhs. The interest rate is up to 7.8%. The interest is fully taxable. No tax benefits are available.
Debt, equity hybrid mutual funds
You can invest in debt, equity mutual funds if your risk appetite and time horizon allow as retirement is a non-earning period that extends for decades. These mutual funds offer inflation-beating returns.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY is a pension scheme. You can avail it through LIC till March 2023. The interest rate is 7.45%.
The Bottom Line
Experts suggest having a mixed assets portfolio. Try to understand diversification by identifying your risk profile and time horizon for spending, and make investing decisions. If seeking advice, consider financial planners who know every nuance of investments.