World Senior Citizen's Day: How to navigate the ups and downs of Sensex, Nifty

The word retirement signifies, living life on your terms, without financial worries. Proper retirement planning involves preparation for your life ahead so that you can continue pursuing all of your financial goals and objectives independently. As a senior citizen, your expenses will continue but income may stop, so you will need a robust financial cushion to sustain you through your dream retirement.

On the other hand, volatility in the equity market can create panic among senior citizens. Therefore, you should take a disciplined approach not driven by emotions and diversify your portfolios.

As World Senior Citizen's Day falls on August 21, Business Today spoke to various market experts to understand how a senior citizen can do the right financial planning at a time when the domestic equity market looks uncertain due to worries over inflation and geopolitical crisis. Here’s what they have to say.

Priti Rathi Gupta, Founder & MD, LXME

True to its nature, the equity markets will always experience ups and downs from time to time. This is where the word “asset allocation” plays a very crucial role. The most important thing you can do to mitigate risk is to diversify your portfolio. As many retirees continue to invest some part of their portfolio in equities in order to achieve their desired portfolio returns. Most people wish to reduce portfolio volatility later in life so that they may sleep better at night.

As you grow older, the asset allocation of your portfolio should also change. One can shift the requisite percentage to more conservative investments that can weather bear markets and the amount of cash on hand should also grow owing to rising medical expenses.

Those who are already retired should maintain a delicate balancing act. Having a portfolio with a debt component or also known as the protector can counterbalance market volatility. At the same time, a sufficient amount of equity funds and investments in real estate and other value-creating asset classes can help preserve the principal and counterbalance inflation. This is known as diversifying across asset classes.

The bottom line is that senior citizens should take charge of their money through smart planning, not letting fear or emotions take over pragmatic decisions and invest in products best suited for their needs. It is also a must to talk to a financial advisor about your current situation and stay informed about all options available to stay financially healthy at every stage of your life.

Dhaval Kapadia, Director Managed Portfolios, Morningstar Investment Advisers India

Typically, senior citizens have two primary goals - wealth preservation and generating income to meet regular needs. Once these goals are well provided a part of the corpus can be allocated for wealth creation. For the primary goals, particularly income generation, the scenario is improving with rising interest rates on fixed income instruments such as deposits, bonds, etc.

Given that interest rates are expected to rise further and deposit rates tend to adjust with a lag, it’s advisable to stagger investments in fixed-rate instruments so as to benefit from higher rates going ahead. And around the peak of the interest rate cycle, they could lock in higher rates for longer periods.

Within debt mutual funds, they could consider 6-7 year target maturity funds investing in government securities, where the yields are attractive. For wealth creation purposes, balanced advantage funds or multi-asset PMS can be considered wherein the allocation to equity, debt and other asset classes are actively mandated based on valuations and other parameters.

Swapnil Bhaskar, Head of Strategy, Niyo

Market volatility will typically be always there and so asset allocation plays a key role. As a thumb rule, senior citizens should have 10-30 per cent of equity exposure to beat inflation over the long term of their retirement phase. Once they have exhausted the allocation of funds in fixed income through Senior Citizen Savings Scheme, PMVVY, Senior Citizen FDs and liquid mutual funds, they can invest the remaining funds in Nifty 50 index mutual funds in a staggered manner. If this is too much work, they can simply invest funds in conservative hybrid mutual funds which will automatically invest in equity funds up to 25 per cent of the portfolio.