In my capacity as an investment advisor, I come across many people who are totally ill planned for their long term needs. While Equity Mutual Funds would tend to be risky in the short/medium term, it is the perfect vehicle for long term wealth creation. However, most people are too concerned with the short/medium term volatility and therefore stick to conventional bank deposits which yield low rates and are tax inefficient. While this seems to work perfectly well in the short term for them, In the long term I have found that they fall short on their target of income needed.
With the current drop in fixed deposits rates, even senior citizens would do well with a small exposure to Equity Mutual Funds so that their long term corpus can continue to grow.
How much should one invest in Equity would depend entirely on their own temperament, goals among the many factors.but safe to say that every body would benefit from taking some risk (i.e. investing in equity mutual funds) so that some of financial goals can benefit from the long term trend in equity. Also it would do well to do a quick scenario of the best case and worst case by investing in equities. If the worst case performance in equity markets isn't going to kill you, it's worth taking the risk.
To summarise, we are the survivors of over 50,000 years of human evolution on this planet. We have not gotten this far without taking risk, so I dare to say go take that RISK(especially investing in Equity Mutual Funds over the long term).