Quick Take: Why senior citizens need more debt in their portfolio

Mar 24, 2023

The ideal asset allocation strategy for senior citizens is to focus on wealth preservation, rather than compound their wealth like the younger generation would want to do. Based on this, a large focus on debt funds is an ideal avenue for them to invest in.

Having said that, the individual requirements of senior citizens would vary.

If they want to earn a consistent income from their investment, they could opt for plans that pay out dividends on a consistent basis as opposed to reinvesting them. This will give senior citizens a timely return, while still giving them the opportunity to preserve their capital. In the mutual fund industry, these plans are known as dividend plans.

It’s important to note that the fund's net asset value (NAV) and the total return of a growth option will always be higher because dividends that are reinvested compound over time too. But a dividend payout could prove useful for senior citizens.

Mutual funds also allow investors to create more flexible withdrawal plans if required and have a more personalized and diversified portfolio as compared to other financial products.

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