MFs for senior citizens: Advantages, disadvantages that investors must know (2024)

Mutual funds have become a popular choice for investors looking to diversify their portfolios across various asset classes and categories, catering to unique investment objectives. Senior citizens generally avoid investing in risk-related investment schemes as they cannot bear the losses associated with market-related instruments, Money experts suggest that the elderly can also put a part of their savings in MF in order to inflation-beating returns on their investments. One of the most significant advantages of mutual funds is that investors' hard-earned money is managed by a professional fund manager. Mutual Funds can help senior citizens hedge real returns and beat inflation.

Mutual Funds for senior citizens: Advantages

1)Diversification

One benefit of investing in mutual funds is that you can diversify across asset classes according to your objectives. Senior citizens may look at investing in MFs as a diversification option. Vinit Khandare, CEO and Founder, MyFundBazaar said that it gives you good options to diversify across various investment strategies even within asset classes.

If they own a lot of debt-based options in their portfolio, MFs can help them diversify, Archit Gupta, Founder, and CEO, Clear.

2)Flexibility to automate regular withdrawal amounts

Through systematic transfer arrangements, mutual funds also give the flexibility to automate regular withdrawal amounts. “Mutual funds are viewed as a choice for seniors who need freedom but want to invest with lower risk and higher returns," said Khandara.

3) For tax savings invest in ELSS

Archit Gupta said that investing in ELSS can be a great way to save tax via section 80C, if they are opting for the old regime and don't want to commit to very long-term options

4) Easy to invest in MFs

It is easy to invest in MFs online these days. Withdrawal is also paperless and can be done quickly using online banking.

Also Read: Higher than Senior Citizen Savings Scheme (SCSS) interest rate offered by these banks on fixed deposits (FDs) to elderly

Mutual Funds for senior citizens: Disadvantages

MF fee

According to Vinit Khandare, mutual fund fees, and expenses, which might lower overall returns, are one potential drawback.

Market volatility

Market volatility may have an impact on the results of mutual fund investments, which are not guaranteed. Returns on equity funds may fluctuate briefly.

No special tax breaks

There are no special tax breaks available to seniors.

Challenges in comprehending the investing strategy

Senior citizens may find it challenging to properly comprehend the investing strategy and dangers connected with some mutual funds due to their complexity, said Khandare.

Traditional options may be more suitable

According to Nirav Karkera, Head of Research, Fisdom, for senior citizens seeking assured, linear, and periodic returns on their investments, alternative traditional options may be more suitable.

When the investing period is longer, mutual funds typically offer good returns. Returns, even if you invest for the long term, are not assured. Some elderly people might not feel comfortable investing in a long-term asset if they are unsure of the returns.

Nevertheless, for nearly all other use cases for senior citizens, the flexibility and variety of mutual funds present an efficient and effective solution.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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ABOUT THE AUTHOR

Sangeeta Ojha

A business media enthusiast. Writes on personal finance, business and banking.