What kind of asset allocation and rebalancing would you suggest in the current scenario? I am only a few years away from retirement and have been investing in equity mutual funds for more than 15 years.
As Subhash is approaching his retirement, I think he should allocate 50 per cent to equity and 50 per cent to debt. But he should be aware of one more thing. When he retires, he should think of creating the income that he needs to consume in the first three years. He should separate the money from his long-term allocation, as it will help him not to worry about his investments on a daily basis. He will be assured that three years' income requirement is kept aside.
Of the remaining money, 50 per cent should be invested in equity and 50 per cent in debt. This allocation is easy to follow and creates a greater opportunity for rebalancing. And it will also give him comfort, as half of his asset will not be in meltdown whenever the market misbehaves.