Mutual fund investment options for senior citizens

By: |
August 9, 2020 1:34 PM

Generally seen, senior citizens want to invest in financial instruments that carry low risk and provide steady income, such as FDs and fixed income schemes. Experts suggest with the decreasing returns from FDs and fixed income schemes, mutual funds are a good option to invest in.

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While investing, senior citizens traditionally look at fixed deposits and various other fixed income schemes. It is so because a senior citizen’s primary objective of investing is safety with capital protection along with fixed regular monthly income. Hence, the investment they make is characterized as low risk, with moderate returns, and has moderate to high liquidity.

Generally seen, senior citizens want to invest in financial instruments that carry low risk and provide steady income, such as FDs and fixed income schemes. Experts suggest with the decreasing returns from FDs and fixed income schemes, mutual funds are a good option to invest in.

There are various categories of mutual funds that are suitable for senior citizens — Debt, balanced, and liquid mutual funds, for instance. Industry experts suggest, 70 to 75 per cent of the investment for a senior citizen should be in debt schemes, and the remaining can be kept in equity schemes. Having said that, the percentage varies based on the investor’s risk-taking ability and long-term goals. Also, if an investor wants a constant flow of income, he/she should opt for dividend plans over a growth plan so that there is a constant flow of income from the fund in the form of dividends.

Additionally, one can also look to invest in equity mutual funds if the investor has an investment period of more than 3 years and the risk appetite to take moderate to the high amounts of risk. Experts say senior citizens may look at large-cap funds as these are less risky compared to other equity mutual funds, and provide good returns. Also, there are fewer chances of the capital getting eroded in the long term, and these funds help to beat normal inflation in the economy.

Debt funds are safer and less volatile than equity funds, and hence a better investment option for senior citizens. Another option that investors could look at is debt-oriented hybrid funds that invest a majority of their corpus in debt, around 60-75 per cent, and the remaining in equity instruments. These funds give higher returns, as they carry a slightly higher risk than debt funds.

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