Smart Mutual Fund Choices for Senior Citizens in India

Summary:

Senior citizens have specific investment goals when they decide to invest in mutual funds. They face new sets of challenges and seek funds that can safeguard their wealth, provide a steady income stream, and offer liquidity. In this article we shall discuss the five best mutual funds for senior citizens in India.

There are no specific mutual funds for senior citizens, however, there are investment options tailored to cater to the financial requirements and objectives of senior citizens. These funds typically diversify their investments across a variety of assets, including stocks, bonds, and other securities, and are managed by professional fund managers. Their primary purpose is to deliver a consistent income, safeguard the invested capital, and foster long-term growth.

What qualifies as a good mutual fund for senior citizens?

An ideal investment choice for seniors should prioritise safety, provide a reliable income, and safeguard their invested capital. Here are some key considerations to keep in mind:

• Lower the risk, the better: Look for funds that invest in stable, well-established companies or concentrate on secure assets like government bonds or high-quality corporate bonds. These funds emphasise on safety and avoid high-risk ventures.
• Steady income: Opt for funds that consistently deliver dividends or interest payments. Consider dividend-focused equity funds or fixed-income funds as they are reliable choices for steady income.
• Capital protection: Explore funds that focus on low-risk assets and employ strategies like diversification. Bond funds, money market funds, or balanced funds can help preserve your capital.
• Understand fees: It’s crucial to carefully consider the fees linked to mutual funds. Elevated fees can diminish your long-term returns. Choose funds that have fair expense ratios, and consider “no-load” funds, which do not impose sales commissions, to effectively control your costs.
• Flexibility and accessibility: Financial needs constantly evolve with time. Select funds that provide easy access to your investments without penalties or restrictions, offering the flexibility to adapt to changing financial needs.
• Experienced management: Having funds managed by an experienced professionals may often give more confidence. Look for funds with a track record of consistent performance and a strong emphasis on effective risk management.
• Tax considerations: You should also consider the tax implications of mutual fund investments. Certain funds provide tax benefits, like income that is exempt from taxes or decreased tax obligations. Explore tax-efficient funds or municipal bond funds for investments that are tax-friendly.

Here are the five best mutual funds for senior citizens in India (metrics as on 1-11-2023):

A detailed look at the mutual funds

ICICI Prudential Balanced Advantage Direct-Growth

Launched on 12th Oct 1993, this is one of the best mutual funds options. It represents a Hybrid Mutual Fund Scheme offered by ICICI Prudential Mutual Fund, designed to deliver both capital growth and income distribution through a combination of arbitrage opportunities, equity derivatives strategies, and pure equity investments. 

ICICI Prudential Ultra Short-Term Fund Direct-Growth

Also initiated on 12th Oct 1993, this is a Debt Mutual Fund Scheme introduced by ICICI Prudential Mutual Fund. This scheme seeks to generate income through investments in various debt and money market instruments. It is therefore categorized a moderate risk. The minimum SIP Investment is INR 1,000 while the minimum lump-sum Investment is INR 5,000. 

Axis BlueChip Fund Direct Plan-Growth

Made available to investors on 4th Sept 2009, this scheme is an Equity Mutual Fund Scheme launched by Axis Mutual Fund. Its primary objective is to achieve long-term capital growth by investing in a well-diversified portfolio, primarily comprising equity and equity-related instruments of large-cap companies. Being an equity fund, it is good for investors seeking long-term capital growth, preferably with a long-term investment horizon exceeding five years. It's worth noting that this fund doesn't come with a lock-in period.

HDFC Hybrid Equity Fund 

This hybrid mutual fund is popular among senior citizens as it delivers dependable although modest returns. Its reliability and predictability make it a logical and suitable selection. The HDFC Hybrid Equity Fund has been in existence for over 10 years, with an average annual return of 12.04% since its inception. Its equity portion is primarily invested in the financial sector, energy sector, capital goods, technology, and construction to name a few.

HDFC Retirement Savings Fund Equity Plan Direct-Growth

HDFC Retirement Savings Fund Equity Plan Direct-Growth is a Solution-Oriented Mutual Fund Scheme introduced by HDFC Mutual Fund on 10th December 1999. This particular scheme is categorized as very high risk. The minimum SIP Investment is established at INR 300, and the minimum lumpsum investment requirement is INR 5,000. Its primary aim is to assist investors in achieving their retirement objectives by offering long-term capital growth or income through a combination of equity and debt instruments.

Summing up

Mutual funds gather money from numerous investors who share common financial goals and use these funds to invest in a mix of equities and debt securities. Mutual funds are commonly classified into three main categories: equity, debt, and hybrid. For senior citizens it is important to choose the most appropriate option that suits their financial objectives with the fund's goals.

Please be aware that this blog is intended strictly for educational purposes. Any reference to particular securities or investments should not be considered as a recommendation.