K. ARAVIND
Investing in a systematic investment plan (SIP) is a way to grow wealth in the long run without worrying about the ups and downs of the stock market. However, many people are sceptical that this method is suitable for senior citizens.
Retirees between the ages of 55-60 are routinely withdrawing their investments, leading to the question of what relevance SIP has after that. Retirement is the end of many long-term investment schemes.
But the argument that SIP is not suitable for senior citizens is not correct. They are investing in long-term return on investment in schemes such as Employees Provident Fund (EPF) and National Pension System (NPS) with retirement returns.
Since the returns on bank fixed deposits and small savings schemes are small, a portion of the investment should be invested in high return schemes. One way to do this is to invest in mutual funds’ equity schemes under SIP.
SIP with a tenure of seven to ten years is suitable for senior citizens. After investing a portion of the proceeds in schemes such as Senior Citizen Savings’ Scheme or Debt Funds for fixed income and setting aside a fund for urgent needs, investing the remaining amount in equity funds through SIP for higher returns is a ‘balanced’ investment method. After seven to ten years, the investment in the equity fund can be withdrawn and used for a fixed income later in life. This amount can be reinvested in liquid funds or other debt funds as per the requirement of the investor.
Equities and equity-linked investments are ideal for those who are willing to take risks. At the same time, SIP is a great way to mitigate risk. Therefore, senior citizens can also avail SIP if the investment period is long.
There are a few things senior citizens should keep in mind when choosing equity funds for investment through SIP. Do not opt for high risk funds for investment. Small and medium cap funds investing in four small and medium stocks should be avoided.
You can invest in large cap funds, diversified funds or balanced funds. Any combination of these can be considered. Do not attempt to invest the entire amount you have in equity funds.
