Asset Allocation: Equities for Old Persons

According to the rule of asset allocation, you should invest more in equities when you are in your twenties and without having any dependants on you. While you should invest less in equities and more in debt and other fixed income instruments when you are retired or near your retirement.

According to many Finance Gurus, after the age of 65, you should not invest in equities because of its risky nature. But well, I am not fully agree with this opinion. My Question is that, why not the old persons invest in equities? Equity is one of the best asset class to own. And Equity is the only asset class which gives you the highest returns in the long run than any other asset class in this world.

Equity is MUST for capital gains, to protect your wealth from tax and inflation, the 2 major silent money killers. Long term capital gains tax from the equity is Nil and equity beats the inflation very well. According to me, Equity should be the core component of anyone’s portfolio for whole of their lives and generations also.

Equity is something which should be passed on generations to generations. I know several families in my city (Ahmedabad) who pass equity portfolios from generations to generations. And they keep adding more equities in it. In some families, from the birth of the child, they start building the equity portfolio for their children and when their children get mature, they pass on these equity portfolios to them.

This is because Equity can multiply your wealth like anything. A Stock is not only a piece of paper only but it’s the ownership interest in the underlying business. And if the fundamentals of the underlying business are sound than the valuation of that business has to increase over the time make it more and more lucrative investment.

Thus, Equity should be for infinitely long term in anyone’s portfolio.