The biggest concern of senior citizens is to keep their retirement corpus safe. But at the same time, they also need to invest a part of their corpus in schemes that will give good returns over time and help them beat inflation.

As Hemant Sood, Founder at FinDoc says, the major accomplishment in personal financial planning is making your money work for you, regardless of age. “But age is the main hindrance for senior citizens of India, so it is crucial that they invest wisely.”

While there is a wide range of investment and saving schemes for senior citizens, mutual funds come across as a convenient and popular investment option for investors. Are they good for senior citizens? Experts say that mutual funds are good for senior citizens provided they understand the risks and invest wisely after taking suggestions from financial advisors.

“Yes, Senior citizens can invest a part of their retirement corpus in mutual funds,” says Jiral Mehta, Senior Research Analyst at FundsIndia.

Adding to the above, Ishkaran Chhabra Founding Partner at Centricity WealthTech says, “Ultimately, whether or not senior citizens should invest in Mutual Funds depends on their individual financial situation and goals.”

Also Read: Disadvantages of Senior Citizen Savings Scheme (SCSS)

A mutual fund scheme works as a diversified investment pool under which investors’ money is parked in securities like stocks, bonds, ETFs, and debentures among others. Mutual Funds are also associated with market performance, which provides an opportunity to grow wealth at a faster rate than bank deposits.

However, there are several risks associated with investing in mutual funds which senior citizens should know. Let’s have a look at some of the disadvantages and advantages of investing in mutual funds for senior citizens.

Disadvantages of mutual funds for senior citizens

Fees and expenses: One potential disadvantage is the fees and expenses associated with mutual funds, which can reduce overall returns, says Chhabra

Returns are not guaranteed: The returns from mutual fund investments are not guaranteed and can be affected by market volatility. Mehta says that equity fund returns can be volatile over the short term.

No specific tax concession: There are no specific tax concessions for senior citizens.

Time horizon: Mutual Funds generally give good returns when the investment period is longer. However, returns are not guaranteed even if you invest for the long term. Some senior citizens may not be comfortable investing in an instrument for the long term where they are not sure of the returns.

Difficult to understand: Some mutual funds can be complex and it may be difficult for senior citizens to fully understand the investment strategy and risks involved, says Mehta.

Also Read: Disadvantages of Public Provident Fund (PPF): 5 Reasons Not to Invest

Advantages of investing in mutual funds

Diversification: One of the advantages of investing in mutual funds is that it allows you to diversify across asset classes based on your goals. “Even within asset classes, it provides you with enough choices to diversify across different investment approaches,” says Mehta.

“One of the main advantages of mutual funds is the ability to diversify investments across various sectors and asset classes, which can help to minimize risk and maximize returns,” adds Chhabra.

Managed by professionals: Mutual Funds allow the elderly to invest their hard-earned money across different asset classes and are managed by professionals who have the expertise and experience to make informed investment decisions on behalf of investors

Flexibility: Mutual Funds also provide flexibility to automate monthly withdrawal amounts (through systematic transfer plans). “Mutual Funds are seen as an option for seniors who require flexibility with less risk and expect more returns in investing,” says Sood.

Liquidity: Unlike real estate, you can take out the money anytime with a click of a button, say Mehta.

How to choose?

According to Sood, investors must consider three major points – age, risk appetite and time horizon – when choosing an appropriate Mutual Fund Scheme. Generally, senior citizens avoid investing in long-duration and risk-related investment schemes. That’s because they’re already in their retirement days and cannot bear the losses and vulnerability that come with market-related instruments risk.

“We advise senior citizens to consult with a financial advisor before investing in mutual funds to determine if it is the right investment option for them,” says Chhabra.

(Know more about the disadvantages of PPF, SCSS)

(Disclaimer: The views expressed above are the personal opinions of the respective commentators. Mutual Fund investments are subject to market risks. Please consult a financial advisor before investing)