Thrilled by the chase and the rewards

Conventional wisdom suggests playing down risky assets such as equities post-retirement and moving into safer investment options such as FDs and PPF. But many senior citizens no longer think on these lines. The equity allocation thumb rule of age minus 100 per cent is not in vogue any more and age is no deterrent to playing the stock market.

Attractive returns aren’t the only reason why senior citizens invest in equities. For many, tracking the market makes them feel active and young and they also make good money in the process.

“Investing in equities not only enables you to get better returns but also makes you more informed and active,” says Mumbai-based Chandrasekaran V, a retired bank official. He has been closely tracking the markets for almost a decade now. Chandrasekaran prefers to ride the mutual fund vehicle to capitalise on the equity boom.

“In April, even as a major section of the market and media believed that the BJP-led Government would come to power, there wasn’t much clarity about the strength of the mandate. I sensed an opportunity here,” he explains. He strongly felt that if the BJP were to get a majority, the markets may move higher.

“I decided to take the plunge. I closed all my FDs and invested my entire corpus in the market in April. Thanks to the strong election mandate, within a month, my investment grew 40 per cent,” he discloses. Is that not a big risk? He agrees but points out that without taking risk no big money can be made. Did he book some profit out? “I just sold a small portion of my investment and deposited the same in a bank, primarily to meet family expenses,” says Chandrasekaran. Barring the cash that he holds in hand to meet monthly expenses, his retirement corpus is fully invested in equity mutual funds.

Dwarakanath K, who retired as Chairman of Ordnance Factories Board, concurs with Chandrasekaran. Tracking the market closely and keeping himself abreast of business news makes him more nimble, he says. “Life is all about risks. I think everyone should take some risk in life, else life becomes too monotonous,” he says. “Investing in equities gives me a kick and keeps me really active.”

Unlike Chandrasekaran, who plays the upside in equities by buying into mutual funds, Dwarakanath is an active investor in equity shares of leading business groups.

How about the risks in equity investments? Does he take more risk than he ideally should? “Almost 35 per cent of my surplus is invested in equities. I have kept aside 5-10 per cent of my corpus for intra-day trading and have invested the balance in good quality, fundamentally sound companies,” explains Dwarakanath. He believes investment in good quality bluechip stocks is no more risky than corporate FDs. “Barring banks, all other corporate FDs carry risk too. If the company goes broke, you end up losing money.”

He agrees that equity investments carry high risk but he thinks the risk can be reduced by investing in companies with a strong business model and a sound management. “I strongly feel that when you invest in sound business groups which have been around for decades and those with very strong brand equity, despite volatility in the short term, the payoffs in the long term will be very attractive.” For instance, his investment in the shares of a leading South-based NBFC early on came in handy to meet the wedding expenses of his two daughters. He managed much of the expenses by selling just a portion of the equity shares he owned in the NBFC.

However, he feels that if you need regular cash-flow for living expenses, then equities may not be the best asset class.

“In the case of equities, dividend income may not be more than 4 per cent, in the best case. Price appreciation is also not certain.” He strongly believes that now is the best time to invest in equities. “With the new government at the Centre, I don’t think there can be a better time to invest in the market if you have a three- to five-year horizon,” he sums up.

Apart from investing in bluechip stocks, periodic profit booking is the other risk management strategy that many senior citizens adopt while investing in equities.

“I invest in themes which are the flavour of the season. I have invested a good portion of my surplus in mid-cap and banking funds,” says octogenarian investor Krishnamoorthy R.

How does he manage the market risk? “I exercise discipline. I set a target even for my mutual fund investments. Once that is reached, I take some profits off the table,” he explains.

Like others, being in the know of developments in the markets makes him feel good.

“Keeping a tab on the market and the developments in various sectors not only helps me make money but also keeps me mentally agile,” he adds.

Interestingly, senior citizens by and large seem to do their own research to decide on the funds or stocks they want to invest in.

“There is enough information available online and in the media. Hence, I don’t take advice from anyone, I do my own research,” asserts Krishnamoorthy. Dwarakanath echoes this view. “Financial advisors may have vested interests, which you may never know. It is always better to do your homework before investing in equities,” he cautions.

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