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Senior citizens should continue investing in equity based financial products

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Senior citizens should continue investing in equity based financial products

Whenever someone makes an investment in mutual funds, there will be no returns that are guaranteed. As a result, senior citizens above 60 years of age cannot compare these products to fixed deposits at banks where there are low but guaranteed returns. There can certainly be investments in funds for lower periods of time which majorly invest in debt paper of high quality. Chances are, in this case, post tax returns will be higher than fixed deposits in this case although they are not guaranteed.

Consider the financial product very carefully as compared to the fixed deposit in the bank which should be limited only to levels where tax-free interest is obtainable under the Section 80TTB. This will be approximately between Rs. 8-10 lakh. The remaining amount should be kept in fixed deposit products which offer higher returns like the senior citizens savings scheme which offers interest rates of 8.3% for Rs. 15 lakh each for you and your spouse. You can also invest Rs. 15 lakh in the Pradhan Mantri Vaya Vandana Yojana which offers interest of 8%. The remaining amount may be invested in funds with lower durations.

Long-term planning should be done since people nowadays have the propensity to live throughout the 80s and even 90s in many cases. As a result, the time period for investments could be anywhere between 15-20 years. Some amount of the corpus should be deployed through equity linked investments via equity savings financial products. This will have approximately between 25-30% exposure to equity and equity arbitrage exposure of around 35-40%. The remaining 30-35% will be for debt based products. Equity exposure may lead to price fluctuations over the initial period but for the long haul, there are fixed deposit plus returns which will only attract 10% in taxes. This will only be taxed once withdrawn and is more convenient than FDs where the interest accrued is anyway taxed irrespective of whether you get it or whether the bank accumulates it for you.

As a result, senior citizens above the age of 60 should invest some portion of the corpus into financial products which are linked to equity. This includes equity savings schemes. However, one should be prepared enough to accommodate losses if they occur in the first 2-3 years in case of market fluctuations. However, you should invest only a portion of the corpus here and should stay invested for the long term.

 

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