Best Mutual Fund Investments for Senior Citizens in India

Best Mutual Fund Investments for Senior Citizens in IndiaBest Mutual Fund Investments for Senior Citizens in India


Mutual funds are a great investment option for everyone as they can fulfil the investment objectives of all age groups, be it young professionals, middle aged people or senior citizens. Senior Citizens have some key objectives where they expect regular income or regular growth in their investments. While debt funds can provide fixed income, these are low. There should be combination of large cap funds, debt funds and balanced funds. Which are the best mutual fund investments for Senior Citizens in India?

Also Read: Best Health Insurance Plans for Sr Citizens / Elderly Parents

Key Objectives of Senior Citizen Investment


Senior citizen investors aged 60 years or above, generally focus on 3 key investment objectives:

1) Wealth protection

2) Regular income and

3) Adequate liquidity in case of emergencies.

A few key types of mutual funds score high on all these parameters. These include large cap equity funds, short term mutual fund debt schemes, ultra short term debt funds as well as equity-oriented hybrid funds. These are potentially low risk mutual fund investments, hence suitable for senior citizens seeking wealth protection.

Debt funds especially liquid and ultra short duration funds are considered to be suitable for senior citizens seeking liquidity for emergency situations. The high liquidity offered by these debt schemes is due to the relatively short residual maturity of the scheme’s investments. Similarly, hybrid schemes also feature significant liquidity as a result of their asset allocation towards debt investments.

Generating Regular Income from Mutual Funds


Mutual funds can also provide income over the long term for senior citizens if they opt for the SWP (systematic withdrawal plan). SWP style redemption can provide senior citizens with regular income in a more tax efficient manner as compared to mutual fund dividend schemes.

Earlier, dividend income from mutual fund dividend option was often preferred by senior citizens as a source of regular income. However, these dividend payouts are not guaranteed and can occur only when the scheme makes a profit. Moreover, investors must also remember that the dividend income from mutual funds is taxable according to rules of Dividend Distribution Tax (DDT) when MF is distributing such dividends.

DDT is paid to the government by the fund house on behalf of the investors and is deducted from the dividend before the payout is made to investors. Equity fund dividends feature a DDT of 10%, whereas, non-equity fund dividends are taxed at the rate of 28.84%. This adversely impacts the overall returns from mutual fund investments. The tax on mutual funds as a result of redemption via SWP is typically much lower, hence more suitable for investors in the long term. 

5 Best Mutual Fund Investments for Senior Citizens in India


Based on the above criteria, the following (no particular order), is a short list of 5 top rated mutual fund investment options for senior citizens in India.

1) ICICI Prudential Balanced Advantage Fund


best mutual funds for senior citizens - icici pru balanced adv fund

ICICI Prudential Balanced Advantage Fund made its debut more than a decade back in December 2006. This hybrid scheme is a suitable choice for senior citizens as it features potentially low investment risk and offers relatively high wealth protection by hedging its equity investments with significant allocation towards debt securities. As of January 2019, this scheme had allocated around 69% of its assets to equity instruments and another 28% to debt and cash/cash equivalent instruments. The scheme yielded returns of 10.36% over the last 3 year period, which although impressive, is lower than its benchmark. However, the scheme succeeded in outperforming its benchmark over the last 5 year period where it generated returns of 12.84%. A senior citizen looking for wealth protection through relatively safe investments in the hybrid scheme category should invest in ICICI Prudential Balanced Advantage Fund.

2) SBI Blue Chip Fund

best mutual funds for senior citizens - sbi bluechip fund

The SBI Blue Chip Fund is a large cap scheme thus part of a unique class of mutual funds that are often considered to be the least volatile option among equity schemes. This makes the scheme a great investment choice for senior citizens. It is a veteran of the large cap category and has been giving impressive performance since its launch in February 2006. Among equity funds, large cap funds are the safest option as they invest most of their assets in large cap companies. Large cap companies refer to the top 100 companies in terms of market capitalization and are thus less vulnerable to market volatility due to their strong fundamentals. The scheme has allocated nearly 82% of its assets to large caps, around 10% to mid caps and less than 1% to small caps. SBI Bluechip Fund has given better returns than its benchmark over the last 5 year period by yielding staggering returns of 15.64%. This scheme has the potential of providing relatively high returns along with capital protection to senior citizens in the long term.

3) Franklin India Ultra Short Bond Fund – Super Institutional Plan

best mutual funds for senior citizens - franklin india ultra short term fundbest mutual funds for senior citizens - franklin india ultra short term fund

Franklin India Ultra Short Bond Fund – Super Institutional Plan is an established debt scheme in the ultra short term fund category and was launched in December 2007. This type of debt fund features one of the least amounts of risk among mutual funds. The scheme has invested around 27% of its assets in sovereign debt securities and AAA rated debt instruments which carry a relatively low degree of credit risk. The scheme has invested around 32% of its assets in AA rated instruments and another 41% in A+/A- debt instruments. This focus on high quality debt investments is one of the key reasons that make Franklin India Ultra Short Bond Fund – Super Institutional Plan an attractive pick for senior citizens. The other reason why senior citizens should invest in this mutual fund is its high returns. This debt scheme has yielded high category returns in the short, medium and long term having outperformed its benchmark convincingly over the 1 year, 3 year and 5 year periods as of January 2019.

4) Axis Short Term Fund


best mutual funds for senior citizens - axis short term fund

Axis Short Term Fund is a 9-year-old fund that has generated returns of 6.35% and 7.29% over the last 3 year and 5 year periods respectively. Being a short term debt fund, it mainly invests in debt securities which have a residual maturity period of 1-3 years and this helps control the fund’s overall portfolio risk. Additionally, the relatively short maturity of this scheme’s investment ensures high liquidity and makes it one of the best mutual fund investments for senior citizens. The scheme has invested around 92% of its assets in sovereign debt instruments and AAA rated securities, which makes it a top choice for investors seeking a high quality low risk mutual fund scheme. Additionally, this debt fund has invested another 6% of its assets in AA+ rated debt instruments and the remaining 2% in AA rated debt instruments. A senior citizen investor who wishes to undertake a low amount of risk for decent returns should definitely consider investing in the Axis Short Term Fund.

You may like: Best Investment Plans for Senior Citizens in India

5) HDFC Hybrid Equity Fund

HDFC Hybrid Equity Fund is an aggressive hybrid fund that was introduced by HDFC Mutual Fund in September 2000. Being an aggressive equity-oriented fund, this nearly two decade old fund has the potential of giving high returns and being a hybrid fund, it carries a potentially lower degree of investment risk as compared to a typical equity fund. The scheme has invested around 63% of its assets in equities, 8% in sovereign debt securities, 17% in AAA rated and 3% in AA rated fixed-income instruments. The scheme has taken significant debt exposure to hedge its equity holding, thereby featuring a low overall risk quotient.The scheme’s strong performance vs its benchmark over the 1 year and 3 year periods illustrate the scheme’s ability to grow investor’s wealth in both the short and medium term. A senior citizen investor who wishes to undertake a potentially low risk mutual fund investment while seeking relatively good returns should consider investing in the HDFC Hybrid Equity Fund.   

Concluding Remarks: A majority of senior citizens in India still prefer to invest in fixed rate instruments like fixed deposits and Senior Citizens Savings Schemes. But the returns offered by these schemes is quite low especially when one takes into account the impact of inflation. This is where market-linked investments like the low risk mutual funds mentioned here can help out. By investing in the above schemes and similar ones, senior citizens can not only protect their wealth in the long term but also potentially grow their savings to ensure financial security during their golden years.

Data source: Valueresearchonline as on 23rd April, 2019

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5 comments

  • Anil Sharma

    Dear Sir
    I realy need your advice and help

    I have below portfolio

    ICICI value discovery g ,SIP 5k and some kum sum total investment are 360000 started 2016
    ABSL Tax Relief SIP 10k July 17
    IDFC Focus Equity Kum Sum 115000 Nov 17
    SBI Mag Multi Cap 1 Lac kum sum Nov 16
    SBI blue chip 50k June 16

    Please review my portfolio as none of my fund is doing good Please advise me if I should continue or its better to withdraw
    My goal at the time of investment was 15 years , which now will depend on your advice
    Regards

    Anil Sharma
    Ludhiana Punjab

  • Rahul Patel

    Thank you for such an informative article. Retirement is one of the most primary financial goals of everyone. We plan a certain amount as our retirement fund and the moment we achieve that amount, we tend to call it a day. But, what we tend to neglect is the point that there is easy mathematics following the retiring earlier.

  • Guru

    Dear Suresh,

    The Tax slab for Debt and balanced mutual funds for the year 2019-20 has been explained by you very nicely.

    Would it be possible for you to through light on all the mutual funds(large cap, mid cap, small cap, equity, hybrid equity, MIP etc) and equity shares tax slab and how to calculate it while filing our income tax?

    If you have already written on the same i would appreciate if you can share the link of the same.

    Amazing articles written by you and its very informative for beginners.

    Thank you

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