People generally begin to think of retirement when in their 30s. But, other than the Public Provident Fund and Provident Fund, no other money goes towards it.

In their 40s, they begin to worry about it.

The best advice you can get, however clich�d it may sound, is not to fret over lost time. You still have years before the salary stops coming in.

Time to take a good, honest look at your portfolio and decide how much should be allocated where.

1. Equity: Don't plunge into it, don't avoid it

All of us speed up when we sense we are behind schedule: be it a deadline at work or being late for an appointment.

When talking about retirement planning, the same principle applies. This time around, people try to make a fast buck by investing in stocks.

Thanks to the current bull run, they actually think these returns can be sustained over the long term.

Now, no one is saying that investing in stocks is banned. All we are saying is, invest in them simply because you believe in them and not because your neighbour has landed with a good tip.

But, whatever you do, don't go to the other extreme and ignore equity. Even though your focus is safety of capital, less risk and more income preservation, you must also consider growth -- which equity offers.

Inflation will ensure that the cost of living rises, you must see to it that your investments catch up.

One broad rule of thumb is that you should subtract your age from 100. If you are 40, then 60 per cent of your portfolio should be in equity. But like we said, it is a broad rule of thumb.

If you don't want to buy shares directly, you could try equity funds. Avoid sector funds unless you are already adequately invested in equity and diversified equity funds.

Equity Linked Saving Schemes are an excellent option because you invest in the market and get the tax benefit too.

If you are uncomfortable with a high exposure to equity and equity funds, you could look at balanced funds.

2. Monthly income investments: Avoid

When investing in debt, look at investments where the money will be accumulated over time. You are earning a monthly income right now. You do not need this!

You will need a monthly income after you retire, not when planning for retirement.

Monthly income plans of mutual funds is a no-no. We would even go so far as to say, don't opt for the dividend option of funds too. Go for growth.

Here the Net Asset Value rises faster as compared to the dividend option since the money is ploughed back into the fund and profits are not distributed.

If you want to put money in post office savings schemes, avoid the monthly income deposits.

Your focus should be on letting your money accumulate. Work on the principle of compounding right now, not on frequent returns.  

Fixed deposits, post office saving schemes and bonds are worth considering. Here again, do not opt for bonds which give a regular interest payment but look at the cumulative option. Ditto for deposits.

Investments in medium-term bond funds can generate fairly good returns. However, the returns are not guaranteed and due to the interest rate risk, the downside is greater.

You could even look at investing in floating rate funds. They invest in securities whose interest rates, instead of being locked at the time of issue, are periodically adjusted in line with the prevailing interest rates. These funds are practically immune to interest rate fluctuations.

Do note, this is all in addition to your investments going into your PPF and PF.

3. Gold: Do consider

With the weakening dollar, threat global of terrorism, oil prices escalating and eventually leading to inflation, gold is a safe option to consider.

And, no, we certainly do not mean jewellery.

Jewellery may appear more aesthetic, but always look at the resale value. When you sell your jewellery, the jeweller buying it will look at the design, workmanship, weight, purity and current price of gold.

If the workmanship is intricate, you may get a better deal. If he considers the design old fashioned and outdated, you won't. Chances are heavy that he will give you a bad deal.

Buy gold bars. Credit Suisse, Johnson Matthey, PAMP Suisse, UBS and Rand Refinery are a few famous refineries whose gold bars are sold in India.

These gold bars come in various sizes: 50 gm, 100 gm, 1 km, 1 ounce, 10 ounces, 100 ounces and 400 ounces, to give a broad indication. Thinner gold bars are sometimes referred to as gold biscuits or gold wafers.

When selling a bar, you get the current price of gold. Nothing less.

Talk to your local jeweler. If he does not sell them, he will know where to source them.

They are a good option for adding stability to your portfolio.

4. Savings account: A waste

Don't keep too much of money languishing in a savings account.

Instead, channelise your money into liquid funds.

Such funds invest in the money market -- Commercial Paper, Treasury Bills, Certificate of Deposits and other such instruments -- with no lock-in period.

The sole purpose is preservation of capital. So the money you invest will eventually be returned to you with a little something added.

Of course, you will not get the spectacular returns of an equity fund, neither will you get the returns of an income fund. You should get around 1 per cent more than what your savings account offers. But you will not face the threat of your investment being reduced to nothing.

Though they are not guaranteed return products, like fixed deposits or the interest on savings bank accounts, it is highly unlikely that your principal amount will get eroded.

But do note, this is only a short-term option when you have surplus funds for a week or two to a month or so. This is not an investment option but a convenient place to park money on the move, so to speak.

5. Looking at the entire gamut

A retirement portfolio is not something that is going to be spent in a day or in a year. In fact, it is going to be stretched for a long while.

Consequently, the returns must be good enough to counteract the compounding effect of decades of inflation. If you retire when you are 55, you have a whole three decades till you are 85.

If you put all your money into safe debt-based investments that underperform inflation every year, you are going to be struggling to make ends meet.

When looking at how much should be invested in debt or equity, you will have to base it on your own risk appetite and personal situation before you make up your mind.  

If you have no savings at all, you should lower your equity exposure and keep a larger amount in debt.

On the other hand, if you already have huge amounts in PPF, PF, bonds and post office schemes, you could even increase your exposure to equity.

When looking at your overall investments, do not consider the worth of your house. Because you will not be selling it. Unless you are totally strapped for cash.

Should that happen, you could consider selling it and moving to a smaller home or selling it and moving to a less expensive location or even relocating to another city.