Case study # 2: Basic Investing advice for senior citizens

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We often get emails from readers. Senior citizens are also among them and it is heart breaking to see that few of them have not managed their money well. Few readers have run out of their retirement corpus. Following is a brief advice given for a senior citizen NRI outside India.

Senior Citizen Investment Advice

Question : I am retired Canadian citizen who has lost lot of amount in 2008 crisis. To recover I always try to find safe investment opportunities in India which is my native country. I am here with my family for last 22 years.

Can you suggest me some good options for investments in India so that the investment will remain safe & ROI (return on investment) will be fair enough to beat currency exchange loss & inflation. Your views are matured & valuable which I easily mark at the age of 70. Anxiously await your response for NRI investments. Your response to my feelings will be highly appreciated.

Hi Vijay

I usually don’t give much advice (not being a registered financial planner). It would also be half baked unless I had a holistic view of your finances. But since you’ve lost large sums after your retirement age, I’ve taken some time and given few suggestions below.

Its regrettable to hear you had lost money in the stock crisis in 2008. Always look for strong fundamental alpha ideas at reasonable valuations to make good money. Else, go for the trusted route of well-run mutual funds. Since you’re retired try to allocate more to fixed return instruments rather than stocks.

Safe investment is a myth. Safety is only relative. For your age though you may have aggressive risk appetite, I would suggest 70% debt, 30% equity in your Indian portfolio. This is assuming you’re sufficiently covered for insurance(both life,medical), 6 month emergency fund.

NRI investment options

NRE fixed deposits might offer best returns for your case as they’re tax free. Direct GOI securities, T-bills are not ideal/tax-effective for you and you’re not eligible for PPF. Company CDs may be considered but I leave that to you. Exposure to debt can be through NRE fixed deposits, debt-part of balanced funds.

You can consider investing in US equities (eg., Vanguard index fund) as well since you’re in Canada. Indian equity exposure should be through mutual funds especially large cap oriented balanced funds. Don’t take more than 2-3 mutual funds and invest only if horizon is 5 years or more.

I would suggest HDFC Balanced, Tata Balanced, PPFAS Long term value based on fund manager/holding as of today. They may give comparatively less returns but their Beta, Sharpe ratio are less compared to other funds ie., they take relatively less risk. PPFAS gives bit of US exposure and Balanced funds give indirect exposure to safe GOI securities,T-Bills.

Try to invest/purchase the 30% allocated for equity portfolio in MFunits when Nifty has substantial correction and in tranches over next 12 months . Don’t worry if not able to deploy fully the 30% you set aside in equity. Whatever you can manage to invest should be enough.

15 Best investment options for Indians

As market pans over next 3-5 years, try to withdraw systematically. Ideally when you’re 75+, your entire equity portfolio should be 10% or less of your net worth as the next boom-bust cycle will take another 8-10 years.

At 70 , you should focus more on ‘Return of Capital’ than ‘Return on Capital’. 🙂 This might sound boring but would be prudent rather than riding a roller-coaster investment cycle after retirement and suffering permanent loss of capital.

P.S: Nobody can predict fluctuation in currency exchange, inflation consistently. So they’ve not been taken into consideration. If I have your permission, I would like to publish this on my website as a case study (name can remain anonymous, if needed).

Standard Disclaimer: These are not to be taken as recommendation. Above is only my personal view/analysis or opinion.It should not be taken as substitute for professional advice and you’re responsible for monetary effects of your actions. 🙂

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