As a senior citizen, you would normally expect your investment portfolio to yield a regular income as well as accumulate wealth to bide your time post-retirement. While the need for a regular income can be discounted if you are eligible for a pension, the requirement for wealth accumulation remains.
Today, senior citizens have a plethora of investment opportunities to grow their wealth. They can invest in senior citizen saving schemes (SCSS), fixed deposits, or mutual funds.
However, the best investment for senior citizens is to invest in mutual funds, especially if your focus is on generating wealth over time. Various mutual fund schemes are now available, tailored to senior citizens’ requirements and risk appetites. We mention a few of them below. But first, let us understand mutual funds and why you should invest in them.
What are Mutual Funds?
Basically, mutual funds are professionally managed investment vehicles that pool money from multiple investors—senior citizens in this case—who share common goals and risk appetites. This money is then invested in equities and debt securities, depending on the fund’s objective.
Since senior citizens usually prefer moderate returns with low risk, they are better off investing in debt, hybrid, or liquid funds. This is because such funds assure regular income and capital protection without entailing the volatility risk that equity funds are usually subjected to.
Senior citizens should consider investing in mutual funds as these investments generally generate higher returns as compared to other fixed deposit schemes, which typically earn returns equivalent to inflation. Additionally, they offer higher liquidity as they are not subjected to any lock-in period.
List of Best Mutual Funds for Senior Citizens
The list below enumerates the top-performing mutual funds that are targeted at senior citizens.
|Mutual Fund||NAV (Rs.)||AUM (Rs. Crs)|
|Kotak Debt Hybrid Fund – Direct Plan-Growth||49.03||1582.03|
|SBI Conservative Hybrid Fund – Direct Plan-Growth||59.36||6560.73|
|ICICI Prudential Ultra Short-Term Fund Direct Plan-Growth||24.42||14807.51|
|HDFC Short-Term Debt Fund Direct Plan-Growth||26.57||13618.94|
|ICICI Prudential Balanced Advantage Fund- Direct Plan-Growth||56.83||42930.34|
As of 19/09/2022
Overview of Best Performing Mutual Funds for Senior Citizens
Kotak Debt Hybrid Fund – Direct Plan-Growth
Launched in January 2013, this Kotak Fund aims to generate returns primarily from debt instruments along with taking a moderate exposure to equity instruments. By following this strategy, it will generate both regular returns (from debt) and capital appreciation (from equity). This fund may also employ various derivative and hedging strategies from time to time.
This hybrid fund has invested 52% in debt securities and nearly 25% in equity. The expense ratio is only 0.45%. The fund has generated annualised returns of 13% in the last 3-year period, easily beating the category average of 9%. It has returned an absolute return of over 167% since inception.
SBI Conservative Hybrid Fund – Direct Plan-Growth
Benchmarked to Nifty 50, this conservative hybrid fund from SBI aims to achieve high returns by investing in the best mutual fund stocks, debt, and money market instruments. It was launched in 2013 with an expense ratio amounting to 0.57%.
This conservative SBI fund has invested to the extent of 21% in domestic equities, while almost 70% has been invested in debt. This fund has generated massive absolute returns of over 40% in the past 3-year period. Its annualised returns in the last year and 5-year period amount to 6.72% and 8.32%, respectively.
ICICI Prudential Ultra Short-Term Fund Direct Plan-Growth
Launched in 2013, ICICI Prudential Ultra Short-Term Fund is a debt fund whose objective is to invest in a range of debt and money market instruments. It is benchmarked to CRISIL 10-Year Gilt Index. The expense ratio of this fund is only 0.39%.
This fund’s holdings are allocated to debt to the extent of 95%, out of which 22% is in government securities. It is suitable for senior citizens who are looking for alternatives to bank deposits and have short horizons. This fund has generated annualised returns of 4.38% and 6.71% in the past 1-year and 5-year periods, respectively. The absolute returns amount to 114% since inception.
Also Read : ELSS Mutual Funds To Invest In 2022
HDFC Short-Term Debt Fund Direct Plan-Growth
Similar to ICICI’s Ultra Short-Term Fund, this HDFC Short-Term Debt fund was launched for those with term horizons ranging from 1-3 years. This is a low-risk fund benchmarked to CRISIL 10-Year Gilt Index. Its expense ratio is even lower than the ICICI’s version at 0.29%.
This HDFC fund has allocated 94% of holdings to debt, out of which 30% are invested in government securities. The absolute and annualised returns of this fund for the past 3-year period are 21.75% and 6.77%, respectively.
ICICI Prudential Balanced Advantage Fund-Direct Plan-Growth
ICICI Prudential Balanced Advantage Fund is a hybrid mutual fund which has been in existence for almost 10 years now. It follows the strategy of dynamic asset allocation and benchmarks its returns to CRISIL Hybrid 50+50 Moderate Index TRI.
This hybrid mutual fund scheme is suitable for senior citizens as it invests in AAA-rated stocks and debt securities. This fund has generated high alpha returns of 1.23 in the last 3-year period, which means it has outperformed its benchmark. This fund has a considerably low expense ratio of under 1%.
This fund has returned 7.36% in the past year versus 4.62% on Nifty50. Its 5-year period annualised returns amount to 10.74%, thus beating its average category return of 9.38%.
Factors to Consider Before Investing in Mutual Funds
While it is tempting to invest in a mutual fund that has shown stellar historical performance, your final decision of investment should be holistic and should consider the following factors.
Quantify your goal by determining the minimum capital amount required at the end of your investment tenure. Also, determine if you need both regular incomes and capital gains or if you are already secure with pension payments and so are only looking at capital appreciation.
Depending on your financial position and financial goals, your risk appetite could differ from your peer group. Invest in conservative hybrid or debt funds if you are highly risk-averse and desire an assured return. However, investments can be made in aggressive hybrid funds if you are agreeable to undertaking moderate risks.
Costs and Taxes
All mutual fund schemes should be compared based on their expense ratio and entry and exit loads, as well as final taxation treatment.
Senior citizens no longer need to restrict their investment options to fixed deposits or physical assets like gold. As per your risk tolerance and return requirements, you can now invest in mutual funds which offer alpha returns.