I retired from central government employment in November 2010. My monthly pension is Rs 14,769 and my expenses are Rs 12,000. My children are settled, the only dependent I have is my wife. I expect our life expectancy to be 85.

I live in my own house and its current value is Rs 40 lakh. I have another house that has been rented out for Rs 5,000 a month.

From my retirement benefits of Rs 18 lakh, I have invested Rs 8 lakh in fixed deposits for two years in four banks. Taking one of my friends' advice, I purchased two life insurance policies — LIC Endowment Plus and ING Vysya Life Market Shield — with a total annual premium of Rs 50,000 for which the sum assured is Rs 5 lakh. I invested (in mutual fund) Rs 2 lakh in a UTI plan growth fund option and Rs 1 lakh in UTI-MIS Advantage with dividend reinvestment option.

I have bought a mediclaim policy of Rs 2 lakh with annual premium of Rs 6,075. Towards tax saving, I have invested Rs 25,000 in IFCI long-term Infrastructure Bond.

As silver has industrial use, I expect its price to grow faster than gold. I have purchased two kg of silver at Rs 45,000 a kg whose present value is Rs 52,435 and I am holding this in dematerialised form.

After retirement, I have bought 10 stocks with an investment of Rs 53,000 to learn about shares and as a long-term investment.

With my current surplus, I have started two systematic investment plans of Rs 1,000 each in HDFC Top 200 and DSP Blackrock Top 100 Equity Fund. After all these investments from my retirement benefits, I have Rs 3.5 lakh in my SB account. For any emergencies, I wish to keep only Rs one lakh in SB account. Do suggest an appropriate investment plan with a monthly payout option.

My queries are: Is it advisable to invest in shares for the long term? Is it good to invest in Silver? If yes, what should be the holding period? Are my investments right for a retired person? — Mohammed

Solutions: It is uncertain if your pension would grow in tandem with inflation, to meet your monthly expenses. Your current monthly expenses of Rs 12,000 will be Rs 34,000 when you turn 75, if inflation rate is 7 per cent. Hence itis of paramount importance to invest your retirement proceeds judiciously. .

You should not follow a fragile investment strategy. A retired individual should not risk his future income by investing in risky asset classes. Besides, yields should not be the only criteria while investing; focus should also be on tax efficiency. Investing in equity and commodities should be considered only if your living expenses are taken care of by annuities, pension and other fixed income instruments.

Risk perception and risk tolerance are very important for any type of investor, more so for retired individuals.

Investment: Some of the assets in your portfolio are not ideal for a retired individual. “Never invest in any idea you can't illustrate with crayon,” said investment guru Peter Lynch. This means that unless you are not able to understand the investment products, don't ever invest. Some of your investments such as in silver falls in this category.

Again, learning about equity investments at 60 is too risky, even if the investment is is for the long term. Buying stocks with retirement proceeds is a sub-optimal choice.

At 60, you require investments, not life insurance. On your ULIP investments; it is a long-term product and given your current monthly surplus, it would be very challenging for you to pay premium for 10 years or more.

Ideal Portfolio: In any portfolio, diversification plays an important role. In your case your monthly income will face a shortfall if the inflation hangs at 6-7 per cent over the next 15 years.

As you are already overweight on real estate, you can skip this asset class for your future investments.

Other asset classes that you can consider are debt and equity. As you don't have any long-term debt products, lock your fixed deposits for a 10-year period if the interest rate increases by another 0.5 percentage points. By doing so, the current deposits of Rs 8 lakh will be Rs 17 lakh at the end of the tenth year.

Invest the current surplus of Rs 2 lakh in fixed income instruments. In equity, it is better to route all your investment through SIPs. If you can Rs 3,500 a month for the next 120 months at 12 per cent return, you can build a corpus of Rs 8 lakh. With such an investment plan, you can comfortably lead the rest of your life without taking unwarranted risk. Your current health cover is very low. It would be advisable to enhance it to at least Rs 5 lakh.

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