Should a retired individual invest in equity?

Anil Rego

Financial and Investment planning post retirement becomes quite crucial as one needs to take care of meeting expenses within the available corpus. Another limitation is fresh income is only be in the form of interest or returns on investments made in the past. It is important to have an independent financial life post retirement as during the working life. Focus post retirement should be on investing in order to generate regular income.

It is perceived that because of the volatile nature of the stock market, equity investments are only for the young; and people who are nearing their retirement or have already retired should stay away from stock markets. However investment in stock markets purely depends on the risk appetite of an investor. If the investor is willing to take risk then the investments in equities can be considered, however proportion of investments in equity can be lower in order to reduce the impact of volatility and risks.

It is also perceived that investments in equity markets can be done only through shares; however there are many ways of participating in equity markets without investing directly in stocks. One of the most prominent and easy method is investing in mutual funds. They are less risky as compared to investing directly in shares since they offer higher level of diversification. Also mutual funds offer different categories of funds which are suitable for different types of investors, one can also invest in a combination of different categories of funds which will further provide higher risk adjusted returns.