Retirement is one important subject when it comes to personal finance. We need to take a different view about it as the risk profile and time horizon are also different. This type of goal is generally 5 years or 10 years long so many peoples agreed that the returns on this portfolio are also good. Risk-taking capacity may be big but when it comes to willingness to take risks is low as it is something related to retirement. The point of retirement is where your quality of expenses changes. Your body is having some limits to work. I wrote in detail about retirement. You can read it When should you retire? and Your Stock holding in employers company: Good or bad  and  You don’t have to start saving for retirement until 40: myth and  Mutual funds for Retirement

Today I am going to write about a portfolio where we can only invest in equity.

When we retire, our body functions reduce. But our cash requirement is not reducing. They are even increasing on some fronts. That is why we need continuous monthly payments. Generally, the Debt portion is included for this as the interest received from Debenture, Bond, and NOTE ( Different names of the same thing) are set up in such a way that every month the investor kept receiving interest from such investment. But I realized that there are some companies kept giving dividends for the last 25 years. Like Coca-Cola, and Mcdonald’s. In India, some companies even pay dividends 4 times a year. If you saw it carefully, they did it in a specific month. like some car companies in the US gave dividends in specific months. IT companies, FMCG companies, Oil and gas companies, and other utility companies, are very good dividend stocks. The dividend yield of some companies is in fact above 5%. Some companies like government companies in India are very good dividend generators. Some banks and insurance companies are the very right stock to invest in.

Retirement funds generally check how many of their investors need monthly cash. this makes them diversify their investment. But what if you are investing in your capacity and the one big objective is retirement?

In such a case, one thing is sure, you are on a defined contribution plan. You are not going to receive a pension after your job will be completed.

In such cases, the possibility is one portion of your salary is related to this investment. I am going to use this as an assumption. Even if you don’t know this, use 5% to 10% of your salary for this.

The best thing is to choose the portfolio manager. if not possible this blog post is for you.

There is one ratio called the Dividend Yield ratio.

This is important when talking about retirement. Because this is an exact cash payment you will receive for keeping this stock in your portfolio. Now one more ratio.

Total cash requirement = Size of the portfolio of stock having 5% + dividend yield / ( Dividend yield of this stocks)

Say, your cash requirement is 50,000. Now at a 1% dividend yield, 5000,000 is the expected size of the Portfolio. With keeping a 5% dividend yield, it came to 10,00,000. Show that the more dividend received, the better it is. Some stocks in every capital market increased their dividend for 25 years or even 50 Years. Such stocks are right for this kind of investment.

I was going through the Internet and I saw Something called home equity. It is a good concept. But not much is known in India. in a simple word, when you bought a home, Not all is part is given as a loan. Some part is coming from your pocket. With time, this portion is increased. When you came to retirement. In the US, many banks gave you an option to borrow an amount based on this part. That is at a high-interest rate. Some peoples go for a reverse mortgage. That is after completion of the home loan. they gave the option to the bank to buy the home. Bank may buy it and start paying them monthly installments. Till the death of the owner or the 20 years ( whichever is earlier), they will receive the payment. After completion, they will either buy back home or leave the home if being alive.

There are many good options for US citizens but, Indians, as our financial markets are not that developed we do not have many choices. Pls, take this to your financial advisor before taking any decision.