Introduction
Most senior citizens don’t earn money during their retirement age, which can impact their daily lifestyle choices.
One needs to invest their hard earned corpus in low risk investment options rather than taking high risk which could lead to a possibility of wiping out the capital.
At a retirement age, investors need to focus more on protection of capital than earning high interest returns.
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The reason for low risk investment
Investors needs to understand that money saved loses its value due to the phenomenon of inflation.
For example, if the inflation is 6%, something that costs Rs. 100 today will cost Rs. 106 next year.
Why staying invested is important
Investing wisely in low risk investments helps senior citizens avoid dependencies on family members.
Also, old age brings in more medical expenses which needs to be mitigated with right investment decisions.
These problems can mitigated by taking right investment decisions.
Best Low Risk Investment Options For Senior Citizens
The following are five best low risk investment options for senior citizens:
- Arbitrage Fund
- Government Bonds
- Senior Citizen Fixed Deposits
- Post Office Monthly Income Scheme
- Gilt Mutual Fund
Arbitrage Funds
Arbitrage funds are low risk mutual funds that aim to generate returns by benefitting from the price difference between the cash market and futures market.
They offer low volatility, thus providing stable returns. They are taxed as equity investments as short term and long term capital gain tax.
As they provide stable returns, they are ideal for monthly payouts for senior citizens.
Some examples of Arbitrage Funds (Not Sponsored)
- Kotak Arbitrage Fund
- Nippon India Arbitrage Fund
- Invesco India Arbitrage Fund
You can just go to your mutual fund platform and type Arbitrage Fund and you will get the list of all Arbitrage Funds you can invest in. Sort and filter based on returns, minimum investment, expense ratio etc to find the ideal fund.
Government Bonds
Government Bonds are Debt Securities that are issued by Government of India.
As they are issued by the Government, they are risk free. They provide fixed returns, despite the market conditions.
Another advantage is that, some Government Bonds also offer Tax Benefits under Section 80C benefits.
Some examples of Government Bonds:
- RBI Floating Rate Bond
- Treasury Bills (T-Bills)
- GOI Saving Bond
Senior Citizen Fixed Deposits
Senior Citizen Fixed Deposits are special Fixed Deposits offered by Banks for people who fall under senior citizen category.
These FDs provide higher interest rate compared to the normal FD.
Fixed Deposits are one of the safest investment tools, which earn a fixed interest rate despite the market conditions.
All banks in India offer special interest rates for Senior Citizen Fixed Deposits.
Post Office Monthly Income Scheme
Post Office Monthly Income Scheme (POIMS) is a saving scheme backed by Government that provides a fixed and guaranteed monthly income in the form of interest.
The interest rate is capped at 6 – 7% per annum, payable monthly. The minimum investment under this scheme is Rs. 1000 and maximum can go up to Rs. 9 lakh for individual investor and Rs. 15 lakhs for joint investors.
The maximum tenure under this scheme is capped at 5 years.
Know more about Post Office Monthly Income by clicking Here.
Gilt Mutual Funds
A Gilt Mutual Fund is a type of debt mutual fund that exclusively invests in Government Securities.
These Gilt Mutual Funds are considered a safe investment option as they do react to market uncertainty and carry no credit risk.
Depending on the interest rate trends, these funds yield a return from 5 – 7%.
Gilt Mutual Funds can be clubbed with a Systematic Withdrawal plan (SWP) to generate a monthly income.
Also Read: What Are The 3 Basic Structure Of Mutual Funds
Conclusion
Lets summarise the investment options:
| Investment Scheme | Risk Appetite | Expected Returns |
|---|---|---|
| Arbitrage Fund | Moderate | 5 – 7% |
| Government Bonds | Low | 6 – 8% |
| Senior Citizen Fixed Deposits | Low | 5 – 7% |
| Post Office Monthly Income Scheme | Very Low | 6 – 7% |
| Gilt Mutual Fund | Low | 5 – 7% |
Please note that, this blog is for educational purposes and the examples provided are for understanding the subject and not investment recommendations. please consider your financial advisor before investing.
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