Its popularly believed that the retired must not touch equity mutual funds. Many financial advisers say that if you are retired, you could lose the money you need for your livelihood, investing in equity mutual funds. But, many retired citizens think differently. With increasing life spans, one of the main reasons being excellent medical facilities, you could live well into the 80's.
Yes, we are talking 20-25 years after the retirement age of 60. A sufficient time period to think of investing in equity mutual funds.
So when can you, a senior citizen, think of investing in equity mutual funds? If you have quite a lot of money for livelihood (surplus funds) and you are willing to take risk in investment, then equity mutual funds are an excellent investment.
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Have you seen inflation today? Retail Inflation measured by CPI (Consumer Price Index) for the month of December 2017 was 5.21%. How will you and other senior citizens survive in these inflationary times? Why not invest in equity mutual funds if you have surplus money and if you are willing to take risk in investments?
SIP is a method of investing in mutual funds. You invest a fixed sum of money, say once each month, fortnight or quarter, regularly in a mutual fund scheme. If you are a senior citizen, then SIP is an excellent way of investing in equity mutual funds. I will give you the reasons why you must invest in equity mutual funds via SIPs.
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Do you know why investors lose money in equity mutual funds? They invest in equity mutual funds when the stock markets are in a bullish phase (Rapidly going up). This is a time good equity mutual funds are very expensive and investors buy equity mutual funds at very high prices.
When stock markets crash, investors panic and sell the equity mutual funds at low prices. Investors lose a lot of money and are afraid of equity mutual funds.
If you invest in equity mutual funds via SIPs, you are forced to stay invested in the stock markets at all points of time, irrespective of market conditions. Equities give good returns over the long term and you get high returns on investment.
With SIPs you invest regularly in the stock market, irrespective of stock market levels. Your returns earn returns and you enjoy the power of compounding.
2. SIPs: The smart way of investing
If you are going to live for 20-25 years after retirement and have surplus money, you can consider an investment in equity mutual funds. If you have the urge to take risks in investment, do consider an investment in equity mutual funds via SIPs. You will get returns which easily beat inflation.
While investing in equity mutual funds via SIPs, do be careful. Always invest in safe equity investments. Go for SIPs in large-cap equity mutual funds and balanced funds. Do not go chasing returns in risky midcap funds and small-cap funds.
If you are retired, invest in equity mutual funds via SIPs, only if you have an investment horizon of 5-10 years. If you are a young senior citizen (60-70 years), then go for SIPs in equity mutual funds.
Remember: Invest only the money you can afford to lose in equity mutual funds. Stay invested in equity mutual funds for at least 5-7 years. Investing for the short term can be very dangerous. If you are investing for the short-term, invest in debt funds via SIPs.
If you are retired and living hand to mouth, forget about investing in mutual funds via SIPs. Mutual Funds come with a disclaimer, "Mutual Fund investments are subject to market risk. Please read the offer document carefully before investing." Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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