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The challenges of fundamental investments come along with retirement, which includes the crucial decision of where to invest the funds so that it can keep the wealth protected. It involves a lot of contemplation in aspects of inflation and maintaining the financial legacy. If you fall under the category of senior citizens, picking up the right mutual funds can guide you to achieve your financial goals. The most widespread misconception is that mutual funds are not an appropriate investment option for retired folks. This is backed up by the fallacy that equity-backed investments in any profile are unsuited for older people because time is against them. However, the reality differs.
Financial management has a longstanding principal that any investment should be age appropriate, which includes mutual funds and shares. It is believed that time is with the younger generation which offers them the advantage that they can easily invest in mutual funds. Even though the mutual funds investments offer high risk, it accompanies the possibility of high returns. Moreover, in case of a significant loss it can be recaptured over the following years. As a senior citizen, you need to have a more conservative approach when it comes to investment in mutual funds. The misconception related with the risks of mutual funds actually drives several senior citizens towards financial issues. Most of the people choose to ignore the risk posed by the biggest threat, which is inflation.
Equities might be volatile in nature, but when the investment period is longer, equity investments turn out to offer higher returns and lower risk. A short-term volatility doesn’t pose any threat when it comes to a long-range investment. In fact, if inflation is taken into account, the bank fixed deposits provide returns that are hardly higher than the inflation rate. On the other hand, you end up barely maintaining it. The key factor to be understood is that, even after retirement, a part of your wealth should be invested in mutual funds in order to receive inflation beating returns. There is no better alternative than a mutual fund if you have a taxable income.
The returns earned from mutual funds will also be tax-free since there is no long-term capital gains tax payable on the mutual funds and equity shares. In case of fixed deposits, the returns are taxable and TDS is deducted on a yearly basis. The mutual funds are more liquid in nature because the lock-in period offered in most of the cases is three years. However, when it comes to tax-saving FDs, the lock-in period is of five years. Therefore, senior citizens can easily acknowledge investing a significant portion in mutual funds.
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