My father is a senior citizen and he is looking to invest his savings into mutual funds. Right now, all his savings are in fixed deposits. Where should he invest?Asked
Investments made by senior citizens have traditionally been in the fixed deposits and various other government fixed income schemes. The primary objective of an investment by a senior citizen is capital protection along with a fixed regular monthly income to manage the routine expenses. Therefore, the investment is characterised as low risk, moderate returns and moderate to high liquidity.
There are various mutual funds which lie in the category of above stated objectives. Debt, balanced and liquid mutual funds are the main categories fulfilling these objectives. For a senior citizen, 70-75% of the investment should be in debt schemes and remaining in equity schemes. There can be some variations in this percentage based on the investor’s risk taking ability and long term goals.
Since right now all your father’s savings are in fixed deposits, on maturity of these of these deposits you can shift them in debt funds which will give higher returns compared to fixed deposits with very minimal increase or almost nil increase in the level of risk. Also debt funds do not have a fixed lock-in period and hence can be withdrawn at any point of time without any exit fees.
Some of the top performing debt funds are listed below:
There is a famous say in financial management that “any investment made should be appropriate for your age”, same apply to investment in mutual funds too. When you are at young age, you can invest in highly risky and volatile mutual funds with high potential of growth and returns, as time is in your side to make up for any losses incurred over the course of time. But exact opposite is true, as you inching towards your retirement age.
For senior citizen investing in mutual funds requires be more conservative approach with short term horizon in mind.
Debt funds are best suited for senior citizen for investing their surplus amount of money lying idle with them, to earn better returns than normal saving accounts or bank FDs with very low risk involved. Debt fund is a mutual fund which invests most of the money gather from investors into fixed income instruments like corporate bonds, government bonds (both state and central), bonds issued by banks, certificate of deposit, treasury bills etc. Both fixed deposits (FDs) and debt mutual funds are low-risk investment financial instruments and were used to be seen as comparable investment options. But recently after demonetisation, major Indian banks, in both public and private sector, have revised the interest rates they offer on FDs. Country’s largest lender, State Bank of India (SBI), cut its interest rate on FDs to 6.90% for maturity period of 1-year and to 6.50% for maturity periods between 3 to 10 years, which is lowest in the industry now. Whereas, return on debt mutual funds are around 9-11% annually. Also, no deduction of taxes or TDS on the earning from debt funds. In such a scenario, parking your surplus cash in debt mutual funds is a wise investment.
To know more details about debt funds, visit
But if you are looking for slighter better return than debt mutual funds and have lumpsum amount in your hand then you should consider large cap funds which are basically type of equity mutual fund. In large cap fund, a large portion of investment is done in companies with large market capitalization. These companies are strong, reputable and trustworthy. Large cap companies are mature and firmly established players in the market having a strong corporate governance practices. Also, these companies are well researched and highly followed in market. Large cap funds may give you good returns on your lumpsum investment over the long term. The companies in the large cap funds portfolio are steady compounders and pay dividend on regular basis. They are ideal for investors with low risk appetite.
To know more details about equity funds, visit
Hope I answered your question.
Investment in Mutual Fund should be made based on risk profile of the investor. Senior citizens generally prefer to invest in less risky investments.
There is a general rule that the investment in debt funds should be equal to the age of the investor and the rest of the investment should be made in equity based funds. So definitely the major chunk of the investment for a senior citizen should be made in debt funds since the debt funds are safe as compared to equity based funds. Few good debt funds are:
· ICICI Prudential Gilt Fund
· Aditya Birla Sunlife Medium Term Plan
· SBI Magnum Gilt Long Term Plan
· ICICI Prudential MIP 25 Fund
The return in debt funds will range between 7 to 10 percent. Moreover debt Mutual Funds invest in different bonds launched by the government of India. So these bonds are very safe. Volatility of these funds is very less.
If an investor is willing to take more risk then he can invest in debt oriented hybrid fund where around 70 to 80 percent of the portfolio comprises of debt, whereas 15 to 20 percent comprise of equity shares. A small proportion is kept in cash in order to ensure liquidity. Some good debt hybrid funds are:
· HDFC Childrens Gift Fund
· SBI Regualar Savings Fund
· Franklin India Pension Plan
· HDFC Equity Savings Fund
These funds are comparatively more risky as compared to debt funds as these funds also have small portion of equity, but these funds are preferred by many investors because they give a fair return of 8 to 12 percent at a nominal risk.
After reading the above, the decision of investment can be made accordingly by a senior citizien.
Being a senior citizen, it depends on your father whether he wants to be absolutely risk free or is willing to take some amount of risk.
Now, by investing into fixed deposits, he is risk free , but at the same time he'll be getting less interest rate of return on fixed deposits.
Mutual funds are mainly categorized into 3 types depending on the type of risk one needs to take:
1) Debt mutual fund: Debt Mutual Funds mainly invest in a mix of debt or fixed income securities such as Treasury Bills, Government Securities or Corporate Bonds etc.
2) Equity mutual fund: It is a category wherein investors' money is invested in stocks of companies
3) Balanced mutual fund: It gives a mix of equity and debt mutual funds.
Now, in terms of volatility and risk that your father is willing to take following order is suggested:
Debt mutual fund < balanced mutual fund < equity mutual fund
Considering debt mutual fund to be least volatile and risky, followed by balanced mutual fund and equity mutual fund.
But, the problem with debt mutual funds is that of taxation, when an investor withdraws money from debt mutual fund he will be taxed whereas if money is withdrawn from equity mutual fund post one year it is not taxed.
Therefore in order to gain fully from debt mutual fund, the investor needs to invest his money for at least 3 years in the fund.
Balanced mutual funds have invested 65% of investors' money into equities and therefore they carry a considerable amount of risk.
The most risky being equity mutual funds of all 3, but taxation norms are on easier side as compared to debt mutual funds.
Following are some examples of debt, equity and balanced mutual funds you can consider to invest in:
Debt mutual fund:
1. HDFC Medium Term Opportunities Fund
2. IDFC Money Manager Fund - Investment Plan
3. IDFC Super Saver Income - Medium Term
4. Kotak Corporate Bond Fund
5. Aditya Birla Sun Life Floating Rate Fund - LT
Equity mutual fund:
Large Cap Equity funds wherein companies have large capitalization in the stock market
1. Aditya Birla Sun Life Top 100 Fund
2. Invesco India Dynamic Equity Fund
3. Kotak Select Focus Fund
Small Cap and Mid cap Mutual funds
1. Aditya Birla Sun Life Small & Midcap Fund
2. L&T Emerging Businesses Fund
3. L&T Midcap Fund
Balanced mutual fund :
1. Reliance Regular Savings Fund - Balanced
2. Aditya Birla Sun Life Balanced 95 Fund
3. HDFC Balanced Fund
4. L&T India Prudence Fund
5. Canara Robeco Balance