Beyond Fixed Deposits (FDs): Low-Risk Investments Senior Citizens Can Hold For 20 Years

When it comes to low-risk investments that senior citizens may safely hold for a 20-year horizon, mutual funds are a fantastic alternative to fixed deposits (FDs). When it comes to not only returns but also tax efficiency, mutual funds perform better than FDs. On the other hand, because mutual funds (equity, hybrid, or debt) are only taxed at the time of redemption, they offer more control over cash flows and tax obligations.

For a 20-year plan, a laddered investment strategy can work well for senior citizens. Here's a simplified version of how this can be structured as recommended by Mr. Mohit Bagdi-Head of Investment Research & Founding Member, MIRA Money.

• Years 1-6: Allocate expenses to low-risk investments such as FDs or ultra-short-term and low-duration debt funds.
• Years 7-12: Diversify into corporate bond funds, target maturity debt funds, and low-risk hybrid funds like Income + Arbitrage FoFs or Arbitrage Funds.
• Years 13-20: Put your money into hybrid funds with a moderate level of risk, such as Equity Savings, which provide 10% LTCG after a Rs 1 lakh exemption and the potential for higher compounding.

These hybrid investment categories are more conservative and tax-friendly. They have traditionally produced higher risk-adjusted returns than FDs, and they have an equity component.

From SCSS to SGBs - The Laddering Strategy That Beats FDs

With a mixed portfolio of government-backed schemes and laddering maturities, senior citizens may create a secure 20-year investment that goes beyond fixed deposits, preserving cash for their golden years and providing a consistent income.

Laddering the following investments lowers concentration risk, preserves liquidity, and evens out reinvestment time as per Rohit R Chauhan Founder Ingood.

• The Senior Citizens' Savings Scheme (SCSS) offers 8.2% p.a. in 5-year (extendable) tranches with quarterly payouts.
• The PPF at 7.1% is tax-free and provides long-duration compounding as a stable core.
• Post Office Monthly Income Scheme (POMIS) delivers 7.4% annually with monthly disbursements, adding predictable cash flow.
• NSC locks in 7.7% for five years and gives Section 80C benefits.
• For diversification and tax efficiency, tax-free PSU bonds (coupon roughly 5.5%-6.5%) offer long-term, tax-exempt interest. 10-year G-Secs around 6.35% add sovereign safety and duration.
• Sovereign Gold Bonds provide a 2.5% fixed annual interest plus gold price upside with early exit after five years.

Why Senior Citizens Are Turning to InvITs for Guaranteed Cash Flow?

Infrastructure Investment Trusts (InvITs) offer an attractive avenue for senior citizens seeking safe and secure investment options that deliver regular income, better than the FD rates. These are nothing but stable revenue-generating infrastructure assets like highways, power transmission networks, telecom towers, warehouses, pipelines, digital infra & renewable energy projects.

"InvITs declare dividend payments (interest earned) every quarter, more or less guaranteeing regular inflows of cash which is crucial for pensioners. Similarly, unlike fixed deposits (FDs), which often fail to cope with inflation, InvITs can offer a potential return linked or indexed to inflation over long term contracts," said NS Venkatesh, CEO, Bharat InvITs Association.

These hence do very well for investment horizons of 15-20 years. Furthermore, InvITs are tightly regulated by SEBI with robust disclosure requirements and professional asset managers to maintain transparency, governance, and protect the interests of investors.

NS Venkatesh says, with India moving fast on its infrastructural growth via government setups like the National Monetisation Pipeline (NMP) and the National Infrastructure Pipeline (NIP), InvITs are poised to play a key role in this paradigm shift.

With InvITs being a long-term, low-risk and attractive investment opportunity for retirees looking beyond the low-yield deposits to protect themselves against inflation for many years while not having to contend with market volatility much, it could be an ideal addition to their retirement portfolio.

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