When it comes to choosing a category of fund, here are a few things you must consider
31-Jan-2023 •Sahiba Kaur Arora
Debt fund or equity fund, which would be better for a senior citizen to invest lump sum? - Anonymous
If you have the notion that senior citizens should always invest in debt, then you might be mistaken.
First, you should take a step back and try to see the broader picture. Find out what you need to do with the investments and what are your investment objectives and time horizon?
Equity mutual funds or debt mutual funds?
If you have a long-term financial goal or you need the money after five years or more, then equity mutual funds might be the right choice. Conversely, if you have a short-term financial goal, then debt funds might be the right choice for you.
4 Million+ copies sold! Get investment insights, market guidance, fund analysis, data stories, case studies and more. Subscribe to our digital & print magazine - Mutual Fund Insight.
Mode of investment - SIP or lump sum?
Now when it comes to SIP (systematic investment plan) vs lump sum mode of investment, then we are pro-SIP because it averages out the price of the fund. You end up benefiting from the low prices when the markets are down, while maintaining the discipline when they might be very high.
Debt funds are relatively stable and focused on capital protection. If you choose to invest in them based on your investment objective, you can go the lump sum route of investing.
Equity funds are relatively more volatile in the short duration. Hence, if you are looking to go the lump sum route in equity funds, we suggest investing the lump sum in debt funds and going for a SWP (systematic withdrawal plan) to equity funds. Here's how SIP and SWP work.
If generating regular income is also one of your goals, check out our Portfolio Planner where we will tell you the exact names of the funds which will be suitable for you.
Suggested read: Investment plan for a 65-year old