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How to double investment in the next five years?

Unfortunately, the target is highly ambitious. Instead, your aim should be to maintain an ideal equity-debt mix rather than maximising your returns.

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I will be retiring after five years. Presently, I have a large sum of money invested in fixed deposits and want to double this investment in the next five years. Where should I invest my money? - Manoharan Varadarajan

Five years is too short a period to expect a doubling of your investment. To achieve this target, you would need to earn a yearly return of 15 per cent, which seems highly ambitious, even for an all-equity portfolio.

That said, your investment strategy should be based on how reliant you are on your investment to meet your post-retirement expenses. If your post-retirement needs are largely expected to be met through your investments, having a 100 per cent allocation to equity is too risky, owing to its highly volatile nature. Conversely, putting all your money in fixed income is also not advisable since it does not generate inflation-beating returns over the long term.

The solution? Focus on creating an asset allocation plan with the ideal combination of equity and debt. An equity-debt allocation of 50:50 may be suitable. But don't invest in equities in one go; rather, spread your money over 2-3 years.

Assuming average returns of 6-7 per cent from your debt investments and 11-12 per cent from equity, you can expect to earn an annual return of 9-10 per cent. This implies that your corpus would appreciate by 50-60 per cent in the next five years, if not double. So, if you have Rs 10 lakh right now, that would increase to around Rs 16 lakh over the next five years.

Further, remember that you should invest at least one-third of your money in equity to enjoy inflation-adjusted income during retirement. Moreover, you must limit your withdrawals to 6 per cent of your corpus. To learn more how to get regular income in your retirement years, click here.

However, if you won't be dependent on this money to earn regular income during retirement, you can move up to 70-75 per cent of your investment to equities. But even then, expecting an annual return of 15 per cent is an unfeasible target. Also, as stated earlier, given the highly volatile nature of equity, your investments may fluctuate wildly during this period. Thus, it would be better to stay invested for a longer duration (greater than five years).

Also read:
How you can maximise your return on investment
The best path to prosperity

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