Should senior citizens invest in the stock market?


Equity participation in India registered significant growth in the last few years, with the number of active investor accounts rising by over one crore in 2020 alone.

The data from the Securities and Exchange Board of India (Sebi) show that majority of these new accounts belong to investors aged between 24 and 39. Active participation by millennials in markets is no secret, but when it comes to senior citizens, there seems to be a low affinity toward equity products.

Given how the stock market can be volatile, it is understandable that investors closer to the retirement age shy away from investing in equity. However, exposure to equity instruments is necessary for inflation-beating returns and for long-term wealth. Therefore, instead of limiting their portfolio to safer investment options, senior citizens can explore how to leverage the markets at minimum risk.

Seniors can benefit in many ways by having some percentage of equity exposure in their financial portfolios. If you are approaching retirement, check out how stock market investments can benefit you.

Better taxability

If you liquidate your equity holdings within 12 months of purchase, your gains are classified as Short Term Capital Gains (STCG). And, if you hold your equity investments for at least 12 months before liquidating, the gains qualify as Long Term Capital Gains (LTCG). While the tax on STCG is at a flat rate of 15%, LTCG is taxed at 10%.

In comparison, interest income from most fixed income assets is taxable as per your income tax slab rate, which may go up to 30%. So, equity investments may offer lower tax rates, depending on the income slab applicable to you.

Additional income via dividends

Post-retirement, senior citizens do not have a regular source of income to rely on. So, it is crucial to set up additional and alternate sources of income to sustain yourself once you have retired. The equity market can help you here too. You can invest in dividend-paying shares or equity mutual funds to earn extra income.

Wealth creation for post-retirement

The stock market, though carry a higher risk, also comes with the potential of offering returns higher than most other asset classes. This potential for wealth creation can be beneficial for your post-retirement life goals. By earning higher returns, you can take that extended tour you have been planning or set up your own home-based business without any financial compromises.

Senior citizens who want to invest in the markets need to know that it is not about avoiding risk altogether. Instead, it is about managing the market risk most effectively. Here are some tips to help senior investors safely navigate the markets.

Diversify your portfolio

While equity investments are volatile, it is possible to reduce the overall risk in your investment portfolio, and diversification is the key to achieving this goal. The right diversification strategy safeguards your investments from market ups and downs. If you are approaching retirement age, higher exposure to fixed-income investments and a modest dose of equity would be ideal.

Below is an example of a diversified portfolio: 30% in fixed-income investments; 20% in gold; 30% in retirement schemes and 20% in equity. Although this portfolio has equity exposure, the overall risk is negligible due to capital allocation among different asset classes.

Pooled investment options

If you want to further lower your portfolio risk without compromising your equity investments, you can choose to take the pooled investment route. In other words, you can include equity mutual funds in your portfolio. These funds pool the capital from various investors and invest that money in different equity stocks. Equity funds can be large-cap, mid-cap, small-cap, dividend-paying, or growth-oriented. This approach inherently diversifies your equity investments. Furthermore, professional management of mutual funds ensures access to the best-in-class research for safer market investments. 

Take the help of a financial expert

A financial expert can help older investors make more informed investment decisions. So, if you are unsure which stocks to invest in, you can always take an expert’s help. A professional can guide you in the right direction and help tie your equity investments to your post-retirement life goals.


The bottom line is that senior citizens, like all other investors, can invest in the stock market. While the equity market can be risky, there should be no problem if you are careful and have the right investment plan in place. All it takes is the right approach to make the markets work for you even when you are approaching your 60s.


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