In their advanced stages of life, people need a strong source of earnings to cope with old-age expenses, like routine living expenses, medical expenses, charges for physiotherapy, etc. For this, investment is essential.
Retirees have a different set of objectives, risk tolerance, and time horizons than people in early life stages when it comes to making an investment portfolio. Nevertheless, one needs to invest his savings or post-retirement income (pensions, rents, etc.) to hedge against inflation. Among the various investment avenues, stock trading is the best for a retired person.
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Why Trading is an Ideal Investment Option for Retirees
- Retired people need to utilise compounding time much more effectively than youngsters. Therefore, they need an investment avenue that can offer high returns in a shorter time frame. Stock markets can provide up to 19% returns per year, which is much higher than other investment instruments like fixed deposits and bonds which offer only 6 to 8% returns annually.
- Investing in the stock market has become straightforward with Indian stock market apps from leading brokerage houses. People in their old age do not need to step out of their house to open demat account. Simply download the mobile application from a reputed stockbroker and make profitable trades from the comfort of your home. This feature makes trading lucrative for retired people.
- Additionally, retired people have enough time to invest in stock market research to identify profitable trades. With their experience and knowledge, they can stay ahead of the market and earn handsome returns on their investment. You can also hire the services of a professional investment advisor to get expert advice on your investment portfolio.
How Retirees Can Make Better Investing Decisions
- Staying honest about your expenses: One must analyse post-retirement expenses honestly to have a clear picture of how much investment is possible. Investing more than one can afford can make it difficult for a retired person to manage routine expenses. On the other hand, investing too little due to inadequate budgeting can deprive a person of enjoying higher returns. Invest only what is extra and always have an emergency fund for unforeseen expenses.
- Avoid fear-driven or sentiment-based decisions: Downturns are common in a stock market. One must avoid succumbing to fear when the market is volatile. A retired individual may be in a hurry to involve in panic selling during uncertain times, which can lead to significant losses. Therefore, have a long-term retirement portfolio and avoid letting short-term market volatility affect it.
- Keep a diversified investment portfolio: Retired people may avoid focussing on a single asset, sector, stock, or instrument in their investment portfolio. A varied mix of assets in one’s investment portfolio reduces the risk of all asset classes showing a downfall at the same time. It considerably reduces the portfolio’s volatility.
- Keeping a reasonable cash reserve: Cash can provide the greatest sense of security to an individual. During an emergency, a senior citizen may find it tough to run around to arrange liquid funds. Therefore, it is necessary to maintain a decent cash reserve, especially in old age. However, one should not stack entire savings or earnings as cash. It is because liquid cash will not fetch any or sufficient returns to provide a hedge against inflation. A good strategy is to keep some portion of one’s funds as cash, invest another in money market securities like treasury bills and certificates of deposits, and invest a part of it in equity. This way, you will never fall short of funds when you need a cash inflow during turbulent times.
- Open a demat account with a reputed stockbroker: It is necessary to choose the right stock broker to open a demat account along with trading account. These days, some leading discount brokers open free demat and trading accounts and do not charge an annual maintenance fee from investors. Discount brokers offer advanced trading apps that investors can download on their smartphones and use on the go. It makes investing a straightforward process for senior citizens. They do not need to depend on a third party to make trade calls for them. The advanced stock trading apps offer market analysis and reports, equipping an investor to make smarter investment decisions.
The stock market holds numerous opportunities for retirees. Using the advanced trading platforms from reputed discount brokers, senior citizens can earn handsome returns on their investment which can help them live a respectful and luxurious life ahead.