How your financial portfolio should look like when you're 50


Posted at Dec 27 2014 02:43 PM | Updated as of Dec 27 2014 10:43 PM

MANILA – Hitting 50 years old is a milestone in itself, and it comes with many expectations for those who want to have something to show for it. But the question is, what is 50 supposed to look like when it comes to a financial portfolio?

Raymond Abara, chartered financial analyst, said that when Filipinos reach 50, they usually have about 15 years left before they retire. The average life expectancy of a Filipino is from 78 to 82 years.

Because of this, Abara said those reaching 50 should structure a portfolio to meet their needs during those 15 to 20 years that they will not be working.

He suggested focusing on generating liquid savings, which must be accessible at any time for emergencies and sudden necessary purchases like house repairs.

“Whatever your monthly expenditure is, multiply it by 2. Keep that in a checking account,” he told ANC’s “On The Money.”

Abara said the “new life” rule of thumb is that once you hit retirement at 65, you need around 7 to 10 times your last annual income to survive the remaining 15 to 20 years.

“To achieve this, it is advisable to put aside around 10 percent to 20 percent of your monthly paycheck into an investment instrument,” he said.

Stocks are a growth component that those in their 50s need in any portfolio.

Abara said the formula in computing for the percentage of excess funds that should be placed in stocks or stock-like instruments is 120 minus your current age.

“We’ve noticed that life expectancy has increased, people are healthier now, they have basically a change in lifestyle. One hundred used to be the rule of thumb but we have to increase it to 120, people are living longer,” said Abara.

The sample portfolio of a 50-year-old is that 70 percent should be placed in more aggressive funds such as equities, UITFs or mutual funds while the remaining 30 percent should be placed in passive instruments that give dividends or interest like bonds or a preferred stock.

“Of course, you still need life insurance because if suddenly you die at that moment, you have 15 years that you weren’t able to fund and you have a family that you left. I suggest that you should have adequate security by purchasing some insurance,” Abara noted.

Abara also said those in their 50s should be careful in choosing properties that may be either overvalued or difficult to rent out and in investing in art because it is a non-interest, and non-income endeavor.

“If you are a true art aficionado, you can allot 5 percent of your investment portfolio for it,” said Abara. He added that depreciating assets, such as cars you no longer need, should also be sold at 50.

Abara said assessing your financial situation is also a key step in planning your financial portfolio.

“You have to have an honest assessment of who you are, do you have any debts? Then I suggest you pay them off because that’s going to be a drain in the future,” he said.p>