You can take higher risks when you are young, but as you grow older, you will prefer low risks when reinvesting a retirement corpus. To avoid needless risks to the corpus, one way to do this is by portfolio diversification so that the assets are evenly distributed based on their risk and reward profile. It is vital to consider if you are a senior citizen because rectifying a mistake at that stage will be difficult. Diversification can protect investors against market volatility.

Here are some investment options for senior citizens to diversify a portfolio.

Short-Term Debt Mutual Funds

Short-term debt mutual funds have a maturity of one to three years. They invest in debt assets like corporate bonds, government securities, securitised debt, and derivatives. When interest rates fall, the value of securities the funds hold increases, resulting in capital gains. From FY 2020-21, investors are required to pay taxes on profits from these funds based on their tax slab.

Real Estate Investment Trust (REIT)

REIT is another good investment avenue for portfolio diversification. Senior citizens can earn regular passive income from their investments, as REITs distribute 90 per cent of their income as dividends to unitholders based on the Securities and Exchange Board of India (Sebi) rules.

Also Read: Breaking The ‘Age-Cage’: How Senior Living Homes Promoting All-Round Care And Comfort

Gold 

Gold is another good option to diversify your portfolio as it is highly liquid. In India, people invest in the yellow metal in gold bars, coins, jewellery, digital gold, Sovereign Gold Bonds (SGBs), etc. Besides gains from its increasing value, gold also acts as a hedge against volatility and economic turmoil.

Post Office Monthly Income Account (POMIS)

POMIS is a short-term post office scheme with a five-year lock-in. Any individual aged 10 and above can open the account for monthly income. It currently provides a 7.40 per cent interest. It allows investments up to Rs 9 lakh for individual accounts and Rs 15 lakh for joint accounts. Up to three co-owners can be allowed in a joint account. However, the POMIS scheme does not provide any tax benefits.

Senior Citizens Savings Scheme (SCSS)

SCSS is a government-sponsored scheme that provides senior citizens with an opportunity to reinvest their retirement corpus after 60. The minimum investment is Rs 1,000, and the maximum is Rs 30 lakh, with a five-year maturity. Investments in the scheme attract 8.2 per cent annual interest, the highest rate among all other post office saving schemes. SCSS investments are eligible for tax deductions up to Rs 1.5 lakh under section 80C of the Income-tax Act, 1961.

 Also Read: Should You Consider A POMIS Account For Post-Retirement Cash Flow? Know The Scheme Details

Post Office Recurring Deposits (RD)

Post Office Recurring Deposits are short-term investment instruments for anyone over 10 years of age. It matures in five years and provides a 6.8 per cent annual interest. The minimum monthly contribution is Rs 100, with no defined maximum limit. RD investments are eligible for tax relief up to Rs 1.5 lakh in a financial year under section 80C of the Act.

Post Office Time Deposits

Anyone above 10 years can subscribe to a Post Office Time Deposit scheme. It has a maturity period of 1 year to 5 years. The interest rates for 1, 2, 3, and 5 years are 6.9, 7.0, 7.0, and 7.5 per cent, respectively, calculated quarterly but paid annually. It provides tax relief of up Rs 1.5 lakh under section 80C of the Act. The minimum deposit is Rs 1,000, with no defined upper limit.