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May 25, 2012, 01.02 PM IST
Senior citizens more often than not are not professionally active and would have retired from their business/service. In such circumstances, the nest egg that they have built from years of toil should last for the remaining year that they survive and logically the risk taking capacity is at its lowest for this category of investors.
However, having said this, with the current circumstances being such that returns from all traditional asset classes such as FD’s, government instruments such as NSC and post office schemes, and other fixed maturity avenues not able to beat inflation, equities and other long duration assets are the only means to protect value erosion of the corpus earned though hard work.
Over the past several decades, equities as an asset class have delivered handsomely and beat all asset classes by a wide margin. The average returns from equities in the past three decades have been in the range of 14%-15% as opposed to high single digit returns from fixed income earning assets.
How can senior citizens participate in stock markets without having to worry about volatility and value erosion?
A few pointers for senior citizens that would help them invest in stock markets and yet not lose sleep are enlisted below:
By having a disciplined approach
By taking a pooled investment approach
By spreading the investment time horizon
By looking at quality and going for dividends
By looking for high liquidity in the investments
Senior citizens have to worry about many things during current times. Taking care of health care expenses and living expenses are the basic things they have to provide for. With the high inflation environment currently, the ability to service both these expenses gets increasingly difficult and therefore protection of the corpus generated by higher yielding investment becomes necessary. Stock market is one such avenue where a certain portion of the corpus can definitely be made inflation proof, albeit keeping in mind all the pointers mentioned above.
The author is CEO & Founder of Right Horizons. He can be reached at firstname.lastname@example.org
Jun 18 2013, 22:39
- in MARKET OUTLOOK
Jun 18 2013, 22:39
- in Business