Question

As a financial planner how would the investment portfolios of 2 of your clients, aged 25 and 55, vary in terms of equity and debt?

Answer 1

The investment portfolio is designed primarily keeping in mind the time period for investment, the amount of investment possible, the risk bearing capacity and the expected return on the investment. Equity based funds are more stable as the owner's interest is kept in it. While the debt based funds are more risky but provide decent returns in short run.

If the investor is willing or capable of saving for a long term; any portfolio which will give higher returns long term returns without much risks will be preferred. Whereas if the time period for investment is short it is important to know the needs of the investor and the risk bearing capacity. If the investor is willing to take more risk he will be suggested debt based funds and if the investor is unwilling to take more risk he should be suggested equity based funds.

Considering the above, any young investor of 25 years will be willing to take more risks so, he will be suggested debt based funds. While for 55 year old investor more equity based funds will be suggested based on the fact that they are more stable in risk and returns as compared to debt based.