Should Seniors Only Focus On Safe Instruments Post-Retirement?

The common wisdom in investing is to align it with your financial goals. The type of investment normally depends on two things: investment horizon and risk appetite. 

Amit Sethi
October 14, 2023


The required investment effort for achieving financial goals depends on factors such as how much money you invest, the return you get on it and how long you plan to invest. As people age, the allocation to investment in low-risk or safer instruments increases while the part invested in equity or risky instruments decreases. So, should senior citizens always invest in safe instruments?


While it is true that you should avoid risk in old age and be careful when investing in risky assets such as stocks, equity-based mutual funds or junk bonds, you can still spare a small amount of money for such assets. Deploy only that much money which you can afford to lose. This means if you lose this amount, in the worst-case scenario, you should still be fine to go along with your life.

How Much Risk You Should Take?

Investing in large-cap equity mutual funds or balanced funds can be a good investment avenue. Large-cap equity mutual funds comprise blue-chip companies in the Indian stock market. These are stable, have a proven track record and have strong business fundamentals. There is very little chance of losing your money. There is a track record of such funds that shows the level of risk; it has a backup of highly skilled fund managers, and the risks you have to take are very much calculative.

Additionally, balanced funds can be another great option. As the name implies, balanced funds consist of equity and debt mix. The equity portion is risky, but it provides higher returns, while the debt portion reduces the risk by ensuring the safety of your capital.

Taking risks beyond these funds, such as investing in small-cap funds, sector-specific funds, or direct equity, is fraught with risk because of the low investment horizon. However, if you wish to invest long-term (not for you, but for gifting to your children or grandchildren), you can easily go for equity-based funds and invest through a systematic investment plan or SIP.

Things To Keep In Mind

Firstly, you should understand the risk inherent in the investment. No investments are theoretically risk-free except the Government bonds. Understanding risk from the start will keep your expectations grounded and ready to face the uncertainties.

Additionally, the returns on investments mentioned above are market-linked and keep fluctuating. This is what makes it risky because the returns are not fixed, as in the case of fixed deposits, Government bonds, high-grade blue bonds, etc. These fluctuations can cause distress if the value goes down significantly. However, if you have a long-term view, most of these fluctuations balance out each other in the long run.

Finally, to reemphasize, you must invest only the amount you do not need. Money meant for your survival, medical emergency, or any specific plans should not be touched for investing in risky assets.

The author is an independent financial journalist

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