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Safe Mutual Fund Schemes for Senior Citizens

Jagrity Sharma Jagrity Sharma 27 August 2019

Senior citizen investors generally focus on three key investment objective – Wealth protection, Regular source of income, and Liquidity. Unlike other investment instruments, mutual fund does not include a distinct category of funds especially designed for senior citizens.

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Most senior citizens in India have been investing in conventional investment avenues like fixed deposit and various other government fixed income schemes. Senior citizens primarily look for an investment that provides capital protection along with regular income to maintain day to day expenses. Therefore, such investment is typically characterised as low risk, moderate returns and moderate to high liquidity.

Senior citizen investors generally focus on three key investment objective – Wealth protection, Regular source of income and adequate liquidity in case of emergency.

There are a few types of mutual funds which meet the investment objectives stated above. These include short term debt fund, balanced funds and liquid mutual funds and large-cap equity funds. These are the primary mutual fund categories that fulfil the investment objectives of senior citizen investors. The best dividend paying mutual funds are considered as the best investment plan for senior citizens. Senior citizens hence, should concentrate on a few parameters such as regular income, wealth protection, and adequate liquidity. It is recommended that 60-70% of the investment should be in debt scheme and remaining in equity schemes, which ensures higher safety and returns. However, the investment ratio can vary as per your risk profile and investment objective. Moreover, as a senior citizen investor, you should prefer a dividend plan over a growth plan to ensure a consistent flow of income in the form of dividend.

Mutual funds allow for wealth creation and value growth for senior citizens. They also offer some retirement plans suitable for seniors. By investing in the mutual fund, you can earn rewarding returns on your investment. There are many mutual fund investments available for senior citizens looking for inflation-adjusted regular income, enhanced liquidity, and wealth security. Let’s glimpse through a few safe mutual fund schemes suitable for senior citizens.

SBI Bluechip fund

The SBI Blue Chip Fund is a large-cap mutual fund scheme and often considered to be the least volatile option among equity schemes. This makes this mutual fund scheme an excellent investment choice for senior citizens. The fund has been giving impressive performance since 2006. Among equity mutual funds, large-cap funds are the safest option as they invest a large portion of their assets in companies with vast capital.

Large-cap companies generally refer to top 100 companies in terms of market capitalisation and are therefore, less vulnerable to market fluctuation due to their strong fundamentals. The scheme has allotted nearly 82% its assets to large-cap funds, and rest in mid-cap funds. The scheme has given better returns than its benchmark over the past five years by yielding returns of more than 15%. The scheme has the potential to provide relatively high returns along with capital appreciation.

ICICI Prudential Balanced Advantage Fund

ICICI Prudential Balanced Advantage Fund was launched more than a decade ago in December 2006. This hybrid mutual fund scheme is suitable for senior citizens as it features low investment risk with signification allocation in debt funds. As of January 2019, the scheme has allocated 69% of its assets to equity class and rest in debt instruments. The scheme has given an average return of 10.36% over the past three years. The scheme has outperformed its benchmark over the last five years where it generated returns of 12.84%. Senior citizens looking for wealth protection through a safe mutual fund scheme in the hybrid fund category should consider this scheme.

HDFC Hybrid Equity Fund

HDFC Hybrid Equity fund introduced by HDFC mutual fund is an aggressive hybrid fund. Being a hybrid mutual fund, it carries a potentially low degree of investment risk as compared to pure equity funds. The mutual fund scheme has invested nearly 63% of its assets in equities, 8% in sovereign debt instruments, 17% in AAA-rated securities and remaining in AA rated fixed income securities. The scheme has outperformed its benchmark over 1 and 3-years investment period. The scheme is ideal for those who want to remain invested for a short term. Senior citizens expecting relatively good returns and with a low-risk profile can consider investing in HDFC Hybrid Equity Fund.

Franklin India Ultra-short bond fund

Franklin India Ultra Short Bond mutual fund scheme is a debt-oriented mutual fund scheme. The scheme is categorised as ultra-short-term fund since its inception in December 2007. About 27 per cent of the assets in the scheme have been invested in AAA debt instruments and sovereign debt securities as they hold a low risk of credit. The investments of the scheme are in A+/A- in debt instruments of about 41 per cent and AA rated instruments of about 32 per cent. The enhanced quality debt investments are significant that makes Franklin India Ultra-short bond an appropriate option for senior citizens. The key reason for suggesting the scheme is that they yield high returns in long, medium and short terms and also performed promisingly in all periods.

Axis short term fund

Being a 9-year-old fund, the Axis short term fund produces returns of about 7.29 per cent and 6.35 per cent for the last 5 and 3 years respectively. They invest in debt securities being a short-term debt fund, and the maturity period is about 1 to 3 years and protects from portfolio risk. This scheme is considered as a perfect mutual fund for senior citizens as it has enhanced liquidity. About 92 per cent of its assets has been invested in AAA-rated securities and sovereign debt instruments, which is the key parameter that investors are looking for in a low risk and high-quality mutual fund scheme. Moreover, the fund has invested 6% of its assets in AA+ rated debt securities and the remaining 2% in AA-rated debt securities. Senior citizens who want to undertake low risk for decent returns should consider investing in Axis Short Term Fund.

Aditya Birla Sun Life Dividend Yield Fund

Aditya Birla Sun Life Dividend Yield Fund is one of the oldest dividend yield funds in the country launched in the year 2003. The scheme has given decent medium and long term returns of 2.01% and 5.23% over the past 3 years and 5 years, respectively. However, the scheme has failed to outperform its benchmark. It is a relatively aggressive scheme which has allocated a significant portion of its assets to small and mid-cap companies. The fund is one of the best dividend paying mutual funds in the country and suitable for those with a moderate risk profile.

ICICI Prudential Dividend Yield Equity Fund

The mutual fund scheme is relatively a new entrant in its category and was launched in the year 2014. ICICI Prudential Dividend Yield Equity fund is one of the best dividend paying mutual funds in India with attractive returns of 5.65% over the period of the past three years. The fund has allocated nearly 60% of its assets to large caps and remaining in mid and small caps. The scheme follows a relatively aggressive strategy. It is suitable for those who are looking for a bold equity mutual fund scheme with high-quality investment and excellent past performance.

A majority of senior citizens in the country still prefer traditional investment options such as fixed deposit and saving schemes for senior citizens. However, the returns offered by these schemes is comparatively lower, especially when you consider the impact of inflation. This is where market-linked investment avenues like low-risk mutual funds can help out. By investing money in these mutual fund schemes, you not only protect your wealth in the long run, but also potentially grow your savings to ensure financial security in your golden days.

Recommended Read: Are You Investing In The Best Performing Mutual Fund?

Jagrity Sharma
Written by Jagrity Sharma
A bibliophile who hates alliterations, but loves cream, comics and content immensely! On another note, a content marketer who leverages the power of words to explain...almost anything!