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Should Seniors Consider Stocks

The question that the title of this article poses is complex. Complex, because there is no plain answer. Most investors view the share market today as a volatile place to invest. This is true for any investor, whether novice or experienced hand. Of course, you may argue that the novice has less of an opportunity to see returns than the expert, as the novice has yet to gain rich share market knowledge and experience. Having said that, “experts” have also been at the receiving end of the negative conditions of the stock market.

If you think of seniors, the common consensus is that they should never take chances in the stock market today. However, a senior was once a junior. If that junior has spent the better part of his or her life investing in equities, then they are experienced too, are they not? Today, with easy access to the markets, there is no harm in any investor trying to invest in the markets. A rule of thumb for investment in stocks is to tread carefully and not impulsively. Holding on to solid shares of strong companies for a long time is another mantra to follow.

Seniors and Financial Focus

Although India is known as a “young” nation, it is important to note that a UN Report estimates the growth of the senior citizen demographic by 20% by 2050. Social security measures for seniors in India are found wanting, and studies reveal that the majority of the elderly are insecure about financial protection. In the digital age, it is not surprising that the elderly want new ways to invest. They either look towards mutual fund investment, and many seniors open a Demat account to try their chances on the share market.

In Indian society, it is not rare to find that the elderly often fund their children’s expenses, such as marriage, purchasing a home, etc. out of their corpus for retirement. This may see a depletion in funds rapidly. If you are a senior citizen in India, you know that you are not an active income earner anymore. The first thing to do to consider some kind of financial organisation is to focus on the funds you have at your disposal. Most seniors have wealth, but it may not be enough for retirement. Hence, it is not uncommon for seniors to fall short of funds, and want to grow their existing wealth.

Familiar Misconceptions

People tend to view a senior person’s infirmities as some kind of inability to perform tasks. Investing in a market that experiences quick changes may be one of these. However, seniors may well have some sort of hidden arsenal of mental acumen that individuals tend not to see. Hence, many seniors do the work and wish to invest in the stock market today.

Exploring share markets may not be the ideal option for many seniors. Nonetheless, the universal advice given to seniors about avoiding stocks altogether may not be the best. There may well be seniors who do not need to be concerned about daily living expenses, and they may not have any dependent children to support financially. Furthermore, there are those elderly folks who possess a substantial corpus. They could be prepared to use a small part of it in investing, even trading to a small degree. If the elderly fall under such a category, they can certainly consider the share market today for investing purposes.

Seniors Needn’t Keep Away

There are some logical reasons why seniors can invest a percentage of funds in equities. Anyway, portfolio diversification which is undertaken at any age, junior or senior, involves various assets invested. So here are some reasons for seniors to invest in equity-based assets like stocks or mutual fund investment:

Time for Education - The best part of retirement is the fresh availability of time. Seniors can now educate themselves about a plethora of offline and online courses that teach the basics of stock investing.

Domain Knowledge - Senior citizens have a knack for doing extensive research about a company they want to invest in. This comes from years of experience and discipline in handling the nuances of the firms they have worked in. Seniors use this to sift out fruitful opportunities and spot the risks.

A Doable Time Horizon - One of the hard and fast rules that analysts and financial experts live by is that share investing is mainly meant for the long run. Ideally, experts recommend a timeline spanning at least 5 to 10 years. In such a time frame, a good company is able to overcome shifting market cycles and generate decent returns. Furthermore, with growth in life expectancy, such a time horizon may not be a challenge for the elderly.

Improved Taxability (compared to bank FDs) - Traditionally, seniors have the majority of their savings in fixed deposits in banks. However, over the last few years, interest rates have seen a steady drop. Additionally, income from interest is taxable, even for seniors in certain slabs of tax. The stock market today attracts lower rates of tax. Any income from stocks incurs a low tax rate. Dividends received are similarly tax-friendly.

Capital Preservation is the Top Priority

Senior citizens are at a stage of life when they are no longer earning a salaried income. Hence, the major priority of a senior citizen should be to preserve the wealth they possess. Unless seniors are experts at the markets, it makes sense to invest only a small portion of their portfolio in equities. Furthermore, it would be wise to make use of the help of a financial advisor. In this way, it is feasible to navigate portfolios and financial requirements.

Seniors and the Share Market Today

If you are a senior with the fortitude to take on the moods of the stock market, you may well attempt equity investment in a small percentage. While Bridge may be amusing and pass your time for a while, there’s nothing that compares with the challenging environment in a volatile market that changes daily, presenting opportunities for wealth creation. Of course, you may require some initial guidance and Motilal Oswal is the right place to get it. Just open a Demat account to start.