August 21st is Senior Citizens Day is supposed to celebrate contributions of the seniors’ community only in the US, we in India could ponder about the importance of it. This can be a fantastic way to honour our elders and express love and affection for them. Many of us live with our parents, who may be senior citizens. Yet it is a way of bringing them to the forefront in our minds, even if for just a day, casting aside our chores, worries, technological and other distractions, and just spend some quality time with each other.
When our elders are retired and growing old, we tend to see their physical infirmities and assume there are certain things that are not appropriate for them. Investing in a volatile and quick changing stock market may seem like one of them, but our elders and senior citizens have a hidden arsenal of strengths that can serve them well – if they were to begin investing or trading.
Retirement like everything else in life brings its own pros and cons. One of the best things about retirement is the time that becomes available. Seniors can educate themselves through plethora of online and offline courses. There’s nothing like invigorating those grey cells.
Seniors possess substantial experience about their field. The kind of knowledge that is gained from knowing the nitty gritty of the companies and industries they have toiled in. This can help them look for opportunities as well as spot risks--especially in their domains. For instance, somebody who has worked in banks for close to three decades can understand the inner workings of banks and can thus understand how to pick banking stocks.
A hard and fast rule that experts adhere to is that stock investing is meant for the long-term (Disclaimer: This is different from stock trading). Ideally, many experts suggest a timeline of at least 5-10 years. This is the time it is likely to take a good company to overcome different market cycles and generate returns. Thanks to growing life expectancy, this kind of time horizon may not be too difficult for seniors.
Seniors traditionally have most of their savings in Bank Fixed Deposits. But, interest rates have been falling over the last few years and can fall further. Interest income is taxable according to regular income tax slab rates. This means shelving anywhere between 5-30% or more. Moreover, 10% is deducted up front as Tax Deducted from Source (TDS). Stock investments, meanwhile, can attract lower tax. An income from Long Term Capital Gains would however be charged at a substantially lower rate of tax, i.e., 10% of the profits, that too if it crosses Rs 1 lakh. Dividends too are similarly tax friendly.
Exploring the stock markets may not be the most appropriate option for most seniors. However, there may be seniors who don’t need to worry about daily expenses and their children may not depend on them for any financial support. They may also possess substantial corpus and could be willing to use a small percentage of it in trading and investing. Such seniors can certainly consider stock investing.
Having written the above, there are certain questions that Seniors must ask of themselves before they foray into the world of Investing. This can help them gauge whether they are ready for the stock market.
a) Is there enough capital to fulfil their daily needs and requirements?
b) Do you have the corpus which would be used only for trading and investing in the stock markets?
c) Do you have the ability to take risk and lose money?
d) Are you willing to consider an investment horizon of 5-10 years when it comes to holding stocks?
e) Do you have the mental fortitude to deal with negative returns if markets tumble?
f) Are you investing/trading excess money that can be lost?
If the answers to the above questions leave them satisfied, then they can explore the stock markets. Of course, they may require some initial guidance. But that can be easy. If nothing, they can even start by reading at Kotak University to start their training.
And while Sudoku or Bridge may be fun for a while, there’s nothing like challenging yourself in a volatile environment that changes daily and presents opportunities to create wealth.
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