Investment Tips for Senior Citizens

Investment Tips for Senior Citizens

For everyone, decisions on financial investments are becoming a nightmare, at times confusing, scary, fraught with uneasiness. Especially so for retirees where inflow is decreasing year after year and the need to save increases. Here are some practical tips, especially in understanding the broad principles behind parking your funds, from Justice TNC Rangarajan, based on his experience,  as a quote, if I may say so:

I cannot say I have mastered it. I have also lost in mutual fund. I don't think anyone can time the market.I think I have understood the principles underlying investment. The basics are

• Keeping the money at home is loss of interest income.

• So keep some cash for immediate needs and keep the rest in the bank account.

• Now that phone banking with UPI is available, even an emergency fund can be kept in Fixed Deposit linked with zero balance savings account.

• NPS is a must for salaried people.

• PPF is a must for others to generate and accumulate as tax free capital fund. 

• After putting an amount equal to 3 or 6 months expenditure in FD, invest the rest in Equities

• Those who don't mind risk, can open a d'mat a/c and buy shares. It is rewarding, if done regularly.

• Those not into direct investment in shares should try mutual funds. They are easy to invest and easy to take out also. You can get tax free income of 1 lakh per year if you invest in growth option and take out after a year. Those who don't have pension and want a regular monthly income can also use the systematic withdrawal method. The added advantage is that it is easy take out in emergencies within a few days at the price of loss of value depending on the nav. 

• While investing in mutual funds we have various avenues and combinations. Debt funds are less risky with lesser yield while equity funds are more volatile but with better yield than FD rates. Balanced funds are a mix of both. You can create your own balance by investing half your surplus in equity and half in debt funds. But we must remember that mutual funds are riskier than bank FD. However we should not see the nav every day and become moody with the paper loss or profit. Best is to review after each fund has crossed the lock in period and change if required. Tax impact also dictates the way to choose the options to ensure maximum return possible under the circumstances.  

• If you want to be super safe, you can invest in government bonds, where the interest may be a little better than FD rates. Of course, seniors should not miss the Senior Citizen Savings scheme which gives the best interest rates as FD at present but has a lock in period. 

• One thing I have noticed in seniors is that they are often concerned about the facility of taking out the money at any time. I don't know why they always ask about it. One of my friends has two children and bought two houses presumably to bequeath to them. He is living in one and renting the other. Both of them have gone abroad for good and do not intend to come back. The tenant too vacated and he sold that house and told me that he will buy two flats instead. I suggested that he put the money in mutual funds with systematic withdrawal plan as he has no pension. But he said that if he has the money, he will not be able to resist the demands of his brothers and sisters etc and will have the tendency to spend the capital, as he realises that he has no financial discipline. So he believes in only houses and flats as good investment. What to say about this?

• My take on immovable property is that it is not a good investment, unless you are going to live in it. 

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I thank him for allowing me to share with you in this blog.